Patent Docs

Tormasi v. Western Digital Corp. (Fed. Cir. 2020)

By Donald Zuhn --

Last month, the Federal Circuit affirmed an Order by the U.S. District Court for the Northern District of California, finding that Appellant Walter A. Tormasi lacked the capacity to sue under Federal Rule of Civil Procedure 17(b).  Mr. Tormasi had filed suit against Appellee Western Digital Corp., asserting that Western Digital had infringed claims 41 and 61-63 of U.S. Patent No. 7,324,301.

Mr. Tormasi is an inmate in the New Jersey State Prison, which has a "no-business" rule prohibiting inmates from commencing or operating a business without prior approval from the Administrator (i.e., the chief executive officer of any State correctional facility within the New Jersey Department of Corrections).  Without the Administrator's prior approval, Mr. Tormasi formed an intellectual property holding company, Advanced Data Solutions Corp., appointing himself as Director, Chief Executive Officer, President, and Chief Technology Officer.  Mr. Tormasi then filed a patent application that issued as the '301 patent (which relates to the art of dynamically storing and retrieving information using nonvolatile magnetic random-access media, specifically hard disk drives).  Acting as Director, Mr. Tormasi transferred the rights in the patent application to himself in exchange for all shares of Advanced Data Solutions stock, then transferred the application back to himself, and then twice transferred the '301 patent to himself.  In January 2019, Mr. Tormasi filed suit against Western Digital for infringement of the '301 patent.  Western Digital moved to dismiss the suit for lack of standing and capacity to sue, and the District Court issued an Order, finding that Mr. Tormasi lacked capacity to sue in view of his violation of the no-business rule.

On appeal, Mr. Tormasi asserted that his lawsuit could not be construed as an unpermitted business activity because he sought to enforce his personal intellectual property rights.  A majority of the Federal Circuit disagreed, stating that Mr. Tormasi's attempt to file the lawsuit as a personal action "merely repackages his previous business objectives as personal activities so he may sidestep the 'no business' regulation," and finding the "characterization of his suit as personal, as opposed to related to business, to be without merit."  The majority found that "[b]ecause New Jersey prohibits inmates from pursuing a business, and because of Mr. Tormasi's repeated attempts to profit as a business from the ['301] patent, the District Court did not err when it determined that Mr. Tormasi lacked the capacity to bring this suit for patent infringement."  The majority therefore affirmed the District Court's Order.

Writing in dissent, Judge Stoll asserted that Mr. Tormasi had not waived his argument that the "no business" rule did not limit the scope of an inmate's capacity to sue under New Jersey law, as the majority had found.  Judge Stoll explained that Mr. Tormasi's argument that "imprisonment status or prison behavior is irrelevant to the capacity-to-sue standard," had "fairly preserved" his legal argument that the "no business" rule cannot generally limit the scope of an inmate's capacity to sue.  Judge Stoll, therefore, concluded that the "no business" rule should not have been at issue at all.

Tormasi v. Western Digital Corp. (Fed. Cir. 2020)
Nonprecedential disposition
Panel: Circuit Judges Wallach, Chen, and Schall
Opinion per curiam; dissenting opinion by Circuit Judge Stoll

Federal Trade Commission v. Qualcomm Ins. (9th Cir. 2020)

Ninth Circuit Overturns District Court Judge Lucy Koh's Decision That Qualcomm's Licensing and Chip Sales Practices Are Antitrust Violations

By Kevin E. Noonan --

The Federal Trade Commission has a history of taking positions and aggressively pursuing them, despite getting reversed (sometimes continually) by Circuit Courts (see "Reverse Payments in Generic Drug Settlements"), although occasionally finding an ally in the Supreme Court (see "Federal Trade Commission v. Actavis, Inc. (2013)").  Most recently, the FTC has waged a campaign against chipmakers involved in the cell phone industry, and their most spectacular victory was in convincing U.S. District Court Judge Lucy Koh (Northern District of California) to impose a worldwide injunction against Qualcomm.  That victory was short-lived, however, with the Ninth Circuit ruling on Tuesday that Qualcomm's business practices, while aggressive did not rise to antitrust violations.  (The result may have been telegraphed by the Court in granting a stay on the injunction, where it said that the "district court's order and injunction [was] either 'a trailblazing application of the antitrust laws' or 'an improper excursion beyond the outer limits of the Sherman Act.'")

As set forth in the opinion, Qualcomm has been successful in making chips used in code division multiple access ("CDMA") and premium long-term evolution ("LTE") cellular modern technology, which it sells to original equipment manufacturers (OEMs).  In addition, the company licenses its cellular standard essential patents ("SEPs"), non-cellular SEPS, and non-SEPs to OEMs as well as rival chipmakers.  These chips and their licensed technologies that "enable[] cellular devices to practice CDMA and premium LTE technologies and thereby communicate with each other across cellular networks"; in a footnote, the Court explains that the company has two separate divisions, its Technology Licensing arm responsible for licensing its patent portfolios and establishing licensing rates, and its CMDA Technology division that cells modem chips.  These divisions distinguish Qualcomm from other companies in this space (including Nokia and Ericsson, for example) who license their SEP portfolios but don't also sell modem chips, and other chip makers (such as Samsung) who don't have SEP portfolios to license.  The opinion also acknowledged that Qualcomm had "monopoly power" (90% market share) over the CMDA modem chip market between 2006-2016 and 70% market share over the LTE chip market, and accordingly charged "monopoly prices" on its chips.

According to the opinion, Qualcomm deals exclusively with OEMs, charging "a percentage of the end-product sales price," which the Court says is a "practice not unique to Qualcomm."  Interestingly (perhaps as an example of the law of unintended consequences), the practice arose in response to the Supreme Court's decision on patent exhaustion in Quanta Comput., Inc. v. LG Elecs., Inc., 553 U.S. 617, 625 (2008). The rationale is that sales to suppliers of OEMs would exhaust all patent rights in the chips, and because such suppliers do not need licenses to Qualcomm's SEP and other standard portfolios the company would not be able to collect them from their OEM customers.

Qualcomm had not refused to license rival chipmakers, according to the opinion, offering them what amounts to a covenant not to sue provided that they do not sell their chips to unlicensed OEMs.  Qualcomm has a "no license, no chips" policy to enforce these arrangements, refusing to sell the OEMs who do not license their SEP portfolios.

The opinion also notes that because Qualcomm is not itself an OEM, it is not in competition with OEMs; as stated in the opinion, "these OEMs are Qualcomm's customers" (emphasis in opinion), which changes how the antitrust laws are applied to Qualcomm's behavior.

As might be expected, Qualcomm's rivals complained about its business practices and the Federal Trade Commission sued, alleging violation of § 5(a) of the FTC Act, 15 U.S.C. § 45(a), and §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2.  The FTC contended that Qualcomm's business practices "unreasonably restraining trade in, and unlawfully monopolizing, the code division multiple access ("CDMA") and premium long-term evolution ("LTE") cellular modern chip markets."  The District Court found that "Qualcomm's licensing practices are an unreasonable restraint of trade under § 1 of the Sherman Act and exclusionary conduct under § 2 of the Sherman Act."  The District Court based its decision on "five mixed findings of fact and law" according to the opinion:

(1) Qualcomm's "no license, no chips" policy amounts to "anticompetitive conduct against OEMs" and an "anticompetitive practice[] in patent license negotiations"; (2) Qualcomm's refusal to license rival chipmakers violates both its FRAND commitments and an antitrust duty to deal under § 2 of the Sherman Act;12 (3) Qualcomm's "exclusive deals" with Apple "foreclosed a 'substantial share' of the modem chip market" in violation of both Sherman Act provisions; (4) Qualcomm's royalty rates are "unreasonably high" because they are improperly based on its market share and handset price instead of the value of its patents; and (5) Qualcomm's royalties, in conjunction with its "no license, no chips" policy, "impose an artificial and anticompetitive surcharge" on its rivals' sales, "increas[ing] the effective price of rivals' modem chips" and resulting in anticompetitive exclusivity.

Taken together, these practices "create insurmountable and artificial barriers for Qualcomm's rivals, and thus do not further competition on the merits" according to the District Court's opinion.

The Ninth Circuit vacated the District Court's judgment and reversed the permanent, worldwide injunction against Qualcomm, in a decision by Judge Callahan, joined by Circuit Court Judge Rawlinson and District Court Judge Murphy sitting by designation.  The Court framed its decision on the difference between "anticompetitive behavior, which is illegal under federal antitrust law, and hypercompetitive behavior, which is not" (emphasis in opinion).  After setting forth the legal predicate for antitrust violations (for example, that "[w]hereas § 1 of the Sherman Act targets concerted anticompetitive conduct, § 2 targets independent anticompetitive conduct," citing Am. Needle, Inc. v. Nat'l Football League, 560 U.S. 183 (2010) (emphasis in opinion)) the Court addressed the District Court's application of these principles to Qualcomm's business practices.  Importantly in this regard, the Court stated that "novel business practices—especially in technology markets—should not be "conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use," citing United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) (emphasis in opinion), and Geoffrey A. Manne & Joshua D. Wright, Innovation and the Limits of Antitrust, 6 J. Comp. L. & Econ. 153, 167 (2010) ("Because innovation involves new products and business practices, courts['] and economists' initial understanding of these practices will skew initial likelihoods that innovation is anticompetitive and the proper subject of antitrust scrutiny").  The opinion credits the District Court with properly defining the relevant market ("the market for CDMA modem chips and the market for premium LTE modem chips") but faulted the Court for considering the impact of Qualcomm's business practices on the "much larger market of cellular services generally" which included OEMs, Qualcomm's customers rather than their competitors.  Even if the District Court had properly identified "harms" to these parties, according to the opinion, these are not antitrust violations "because they do not involve restraints on trade or exclusionary conduct in 'the area of effective competition'" citing Ohio v. Am. Express Co., 138 S. Ct. 2274, 2284 (2018)).  The proper relevant market, according to the opinion, was modem chip sales not Qualcomm's licensing practices with OEMs, a distinction lost on the District Court because that Court believed Qualcomm's business practices to be "interrelated."  Rather than following the District Court's improper reasoning, the Ninth Circuit panel "reframe[d]" the issues to consider the effects of Qualcomm's business practices on the CMDA and LTE chip markets.

The opinion quickly dispensed with one basis for the District Court's decision, that Qualcomm owed an "antitrust duty" to license its patents to "its direct competitors in the modern chip markets" under a Supreme Court-defined exception set forth in Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985).  The opinion cites in this regard copious precedent to the effect than a business is under no obligation to "deal under the terms and conditions preferred by [a competitor's] rivals," quoting Pac. Bell Tel. Co. v. linkLine Commc'ns, Inc., 555 U.S. 438, 457 (2009), and can "freely []exercise his own independent discretion as to parties with whom he will deal," quoting United States v. Colgate & Co., 250 U.S. 300, 307 (1919).  While recognizing the exception under the Aspen Skiing Co. case relied upon by the District Court, the panel held that this exception did not apply based on the absence of anticompetitive conduct here underlying the result in Aspen.  The Ninth Circuit found clear error in the factual underpinnings of the District Court's opinion.  The panel also recognized that Qualcomm's business strategy was a response to the effects on the application of the patent exhaustion doctrine occasioned by the Supreme Court's Quanta Computing decision rather than an effort to "sacrifice short-term benefits in order to obtain higher profits in the long run from the exclusion of competition" as in Aspen Skiing.  And the consistency with which Qualcomm implemented its business practice, not singling out any particular competitor, was also a determinative factor for the panel in distinguishing Qualcomm's behavior from the anticompetitive behavior that resulted in the Aspen Skiing decision ("Qualcomm applies its OEM-level licensing policy equally with respect to all competitors in the modem chip markets and declines to enforce its patents against these rivals even though they practice Qualcomm's patents (royalty-free)").

The Court also rejected the FTC's "fallback" position that Qualcomm was guilty of antitrust violations under § 2 of the Sherman Act, because according to the Court the alleged anticompetitive activity was directed at Qualcomm's OEM customers rather than its competitors and was "chip-supplier neutral" because Qualcomm collects them from all OEMs that license its patents, not just "rivals' customers" (emphasis in opinion) and ignores Qualcomm's agreements wherein competitors are allowed to practice Qualcomm's patented SEPs "royalty-free" so long as they sell to licensed OEMs.  Finally in this regard, the Court reminds the FTC that "to make out a § 2 violation, the anticompetitive harm identified must be to competition itself, not merely to competitors," citing Microsoft (emphasis in opinion) and the FTC had not shown any such harm.

The opinion also cites (and the panel apparently swayed by) the several amici writing in support of Qualcomm (or at least in support of reversing the District Court's decision), including retired Federal Circuit Chief Judge Paul R. Michel and former FTC Commissioner Joshua Wright.

Next the Court reaches what it termed "the district court's primary theory of anticompetitive harm: Qualcomm's imposition of an 'anticompetitive surcharge' on rival chip suppliers via its licensing ["unreasonably high"] royalty rates" that are anticompetitive because "they raise costs to OEMs, who pass the extra costs along to consumers and are forced to invest less in other handset features."  The Circuit Court finds "no cogent theory of anticompetitive harm" that supports the District Court's conclusions.  Indeed, the panel believes that the District Court's decision "is premised on a misunderstanding of Federal Circuit law pertaining to the calculation of patent damages, it incorrectly conflates antitrust liability and patent law liability, and it improperly considers 'anticompetitive harms to OEMs' that fall outside the relevant antitrust markets."  The panel also thinks the decision also "fails as a matter of law and logic."  The misunderstanding of Federal Circuit patent damages law perceived by the Ninth Circuit involves the "the patent rule of apportionment" and the smallest salable patent-practicing unit ("SSPPU"), its decision supported by LaserDynamics, Inc. v. Quanta Comput., Inc., 694 F.3d 51, 67 (Fed. Cir. 2012), and an unpublished, district court case for the proposition that "the modem chip . . . 'is the proper [SSPPU]' in a cellular handset," citing GPNE Corp. v. Apple, Inc., No. 12- CV-02885-LHK, 2014 WL 1494247, at *13 (N.D. Cal. Apr. 16, 2014) (somewhat amusingly commenting in a footnote that that case had been presided over by Judge Koh).  The panel finds the District Court's analysis on this regard "fundamentally flawed" because "[n]o court has held that the SSPPU concept is a per se rule for 'reasonable royalty' calculations" but rather use it as a tool in jury cases for the benefit of the jury to avoid confusion.  The panel also cite Commonwealth Sci. & Indus. Research Org. v. Cisco Sys., Inc., 809 F.3d 1295, 1303 (Fed. Cir. 2015), as evidence that the Federal Circuit itself has rejected this test as being required for assessing damages, and further that "'[t]here is nothing inherently wrong with using the market value of the entire product,'" citing Exmark Mfg. Co. Inc. v. Briggs & Stratton Power Prods. Grp., LLC, 879 F.3d 1332, 1349 (Fed. Cir. 2018).  The panel also criticize the District Court and FTC for basing their characterization of the unreasonableness of Qualcomm's royalty structure on patent concepts (35 U.S.C. § 284) rather than antitrust principles.  And finally on this point the panel returns to the fundamental error that the harm identified by both is to Qualcomm's customers not its competitors, which is not a sound basis for an antitrust violation.

The Ninth Circuit also found this misapplication of the harm with regard to Qualcomm's "no license, no chips" practice for the same reason -- it was directed to OEMs rather than rival chipmakers.  The Court suggests the District Court's reasoning was completely backwards:  it found Qualcomm to have engaged in anticompetitive business practices by making SEP licenses contingent on chip purposes under its "no license, no chips" policy.  The panel states that anticompetitive behavior proscribed under the antitrust laws are the exact opposite:  "[i]f Qualcomm were to refuse to license its SEPs to OEMs unless they first agreed to purchase Qualcomm's chips ("no chips, no license")."  The panel explains:

This is because OEMs cannot sell their products without obtaining Qualcomm's SEP licenses, so a "no chips, no license" policy would essentially force OEMs to either purchase Qualcomm's chips or pay for both Qualcomm's and a competitor's chips (similar to the no-win situation faced by OEMs in [Caldera, Inc. v. Microsoft Corp., 87 F. Supp. 2d 1244 (D. Utah 1999)] (which the district court improperly relied upon).

The opinion closes by considering (and rejecting) the District Court's separate finding that Qualcomm violated both sections of the Sherman Act in signing an "exclusive supply" deal with Apple.  While the Ninth Circuit panel found "[t]here is some merit in the district court's conclusion that the Apple agreements were structured more like exclusive dealing contracts than volume discount contracts."  It did not find the requisite "actual or practical effect of substantially foreclosing competition in the CDMA modem chip market" required for this conduct to rise to an antitrust violation based on the facts regarding this deal adduced at trial (and indeed there was evidence to the contrary, inter alia, that Intel successfully competed with Qualcomm in supplying chips to Apple within one year of the objected-to Apple-Qualcomm supply agreement), and on this basis vacated the injunction imposed by the District Court.

The opinion concludes:

Anticompetitive behavior is illegal under federal antitrust law.  Hypercompetitive behavior is not.  Qualcomm has exercised market dominance in the 3G and 4G cellular modem chip markets for many years, and its business practices have played a powerful and disruptive role in those markets, as well as in the broader cellular services and technology markets.  The company has asserted its economic muscle "with vigor, imagination, devotion, and ingenuity."  [United States v. Topco Assocs., Inc., 405 U.S. 596, 610 (1972)].  It has also "acted with sharp elbows—as businesses often do."  Tension Envelope Corp. v. JBM Envelope Co., 876 F.3d 1112, 1122 (8th Cir. 2017).  Our job is not to condone or punish Qualcomm for its success, but rather to assess whether the FTC has met its burden under the rule of reason to show that Qualcomm's practices have crossed the line to "conduct which unfairly tends to destroy competition itself."  [Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458 (1993)].  We conclude that the FTC has not met its burden.

No doubt Qualcomm is gratified by this decision.  Experience and history show, however, that the FTC is persistent, and it is not unlikely that it will continue to press its case, either before the Supreme Court or though other agency action.

United States Patent and Trademark Office v. Booking.com B.V. (2020)

Supreme Court Rules That Booking.com Is Not Generic and Declines to Impose a "Nearly Per Se" Rule of Genericness for "Generic.com" Trademarks

By Eric R. Moran --

Today, the U.S. Supreme Court issued a much-anticipated opinion in a trademark case directed to what it means for a trademark to be generic, and hence not subject to registration, in United States Patent and Trademark Office v. Booking.com B.V.[1]  The question presented to the Court was whether an online business's addition of a generic top-level domain (i.e., ".com") to an otherwise generic term can create a protectable trademark.[2]  The Court declined to impose a per se rule on this question, as urged by the U.S. Patent and Trademark Office ("USPTO"), and instead held that "[w]hether any given 'generic.com' term is generic . . . depends on whether consumers in fact perceive that term as the name of a class or, instead, as a term capable of distinguishing among members of the class."[3]  Here, lower court determinations established that Booking.com was not generic.[4]

Background of the case:

Booking.com provides online travel reservation services under the Booking.com brand and via its website residing at the Booking.com domain name.[5]  Booking.com attempted to register four "Booking.com" trademarks with the U.S. Patent & Trademark Office, all incorporating the term "Booking.com."[6]  For each, a USPTO Examining Attorney refused registration, finding the marks generic for "an online reservation service for travel, tours, and lodgings."[7]  After the Trademark Trial and Appeal Board affirmed the refusals, Booking.com appealed to the U.S. District Court in the Eastern District of Virginia.[8]

Because Booking.com appealed the USPTO decision to the District Court, it was allowed to submit new evidence, including evidence of consumer perception of the Booking.com mark.  The District Court, "[r]elying in significant part" on this new evidence, "concluded that 'Booking.com'—unlike 'booking'—is not generic."[9]  Consumers, according to the District Court, primarily view Booking.com as being descriptive of booking services available at the Booking.com domain name, rather than as referring to a genus (or generic term) for those services.[10]  The District Court also found that the term has "acquired secondary meaning as to hotel-reservation services" and was registrable as a trademark.[11]

The USPTO appealed the District Court's determination on the issue of genericness to the Court of Appeals for the Fourth Circuit, which found no error.  In so doing, "the appeals court rejected the PTO's contention that the combination of '.com' with a generic term like 'booking' 'is necessarily generic.'"[12]

The U.S. Supreme Court granted certiorari to address "whether there is a nearly per se rule against trademark protection for a 'generic.com' term."[13]

The Court's opinion:

Justice Ginsburg wrote the opinion for the Court and began by identifying issues on which the parties agreed.  As an initial matter, the Court noted that a generic term is the "name of a class of products or services" and is "ineligible for federal trademark registration" because it cannot serve to distinguish one party's goods or services from another party's goods or services.[14]  Here, the parties did not dispute that "booking" is generic for "hotel-reservation services."[15]

The parties also did not dispute that:

• "a 'generic' term names a 'class' of goods or services, rather than any particular feature or exemplification of the class";
• "for a compound term, the distinctiveness inquiry trains on the term's meaning as a whole, not its parts in isolation";
• "the relevant meaning of a term is its meaning to consumers"; and
• "[e]ligibility for registration . . . turns on the mark's capacity to 'distinguis[h]' goods 'in commerce.'"[16]

The Court then addressed the proper test for precluding a generic term from registration—an issue that was discussed at length during briefing and at oral argument.  Although the Court declined to rule on that issue, it seemed to endorse Booking.com's position that the proper test was found in 15 U.S.C. § 1064(3):

The primary significance of the registered mark to the relevant public . . . shall be the test for determining whether the registered mark has become the generic name of goods or services.[17]

In doing so, the Court appeared to reject the USPTO's position that the primary significance test should be confined to potential cancellation of registered marks (as the test is found in that particular section of the Lanham Act).

In any case, the Court found that consumer perception prevails, and "whether 'Booking.com' is generic turns simply on whether that term, taken as a whole, signifies to consumers the class of online hotel-reservation services."[18]  In finding that it does not, the Court noted that we would not expect consumers "to understand Travelocity—another such service—to be a 'Booking.com'" or that "a consumer, searching for a trusted source of online hotel-reservation services, could ask a frequent traveler to name her favorite 'Booking.com' provider."[19]  "Because 'Booking.com' is not a generic name to consumers, it is not generic."[20]

The Court went on to refute a number of the USPTO's arguments, including the comprehensive, per se rule urged by the USPTO because it is inconsistent with the USPTO's own past practices of allowing registration of other "generic.com" marks.

In doing so, the Court found one of main cases cited by the USPTO, Goodyear's India Rubber Glove Mfg. Co. v. Goodyear Rubber Co., 128 U.S. 598 (1888), inapplicable to Booking.com.  The USPTO argued that Goodyear's supported the position that "a generic corporate designation added to a generic term does not confer trademark eligibility."[21]  The Court, however, stated that:

A "generic.com" term might also convey to consumers a source-identifying characteristic: an association with a particular website.  As the PTO and the dissent elsewhere acknowledge, only one entity can occupy a particular Internet domain name at a time, so "[a] consumer who is familiar with that aspect of the domain-name system can infer that BOOKING.COM refers to some specific entity."[22]

Accordingly, the Court instead limited Goodyear's application to the proposition that: "A compound of generic elements is generic if the combination yields no additional meaning to consumers capable of distinguishing the goods or services."[23]

The Court also addressed the USPTO's argument that exclusive rights to the Booking.com mark would hinder Booking.com's competitors from using the term "booking."  According to the Court, however, such concerns arise from the protection of any descriptive mark, and such protection cannot preclude descriptive uses of descriptive terms.[24]  In addition, a likelihood of confusion analysis will assess the strength or weakness of descriptive marks and whether confusion is likely in light of the scope of protection afforded such marks.  Further, if a mark exists in a "crowded field" of similar marks, "consumers 'may have learned to carefully pick out' one mark from another."[25]

Accordingly, the Court declined to adopt a rule that a generic term combined with a ".com" necessarily yields a generic composite.  And in so doing, the Court declined to adopt a position that would "open the door to cancellation of scores of currently registered marks."[26]

Justice Sotomayor authored a concurring opinion emphasizing points related to the use of survey evidence and clarifying that the question before the Court was not whether the District Court erred in finding that Booking.com was not generic.[27]

Justice Breyer authored a dissenting opinion in which he would have held that "generic.com" marks are necessarily generic because they consist simply of a generic term and a corporate designation.[28]  The majority's holding, according to Justice Breyer, risks a "proliferation of 'generic.com' marks" that would grant monopolies over easy-to-remember domain names to their owners.[29]  Such a result would, he continued, "tend to inhibit, rather than to promote, free competition in online commerce."[30]

United States Patent and Trademark Office v. Booking.com B.V. (2020)
Opinion by Justice Ginsberg, joined by Chief Justice Roberts and Justices Thomas, Alito, Sotomayor, Kagan, Gorsuch, and Kavanaugh; concurring opinion by Justice Sotomayor; dissenting opinion by Justice Breyer

[1] United States Patent and Trademark Office v. Booking.com B.V., No. 19-46 (S. Ct. June 30, 2020).
[2] See Petition for a Writ of Certiorari.
[3] Opinion at 11.
[4] Id. at 1.
[5] Id. at 4.
[6] Id.
[7] Id.
[8] Id. at 5.
[9] Id.
[10] Id.
[11] Id.
[12] Id.
[13] Concurrence at 1.
[14] Opinion at 1, 4.  As set forth by the Court, "Distinctiveness is often expressed on an increasing scale: Word marks 'may be (1) generic; (2) descriptive; (3) suggestive; (4) arbitrary; or (5) fanciful.'"
[15] Id. at 1.
[16] Id. at 6.
[17] Id. at 6-7 and n.3.
[18] Id. at 7.
[19] Id.
[20] Id.
[21] Id. at 8.
[22] Id. at 9.
[23] Id. at 10.
[24] Id. at 12.
[25] Id. at 12.
[26] Id. at 14.
[27] Concurrence at 1-2.
[28] Dissent at 5.
[29] Id. at 13.
[30] Id.

An Analysis of a Failed Biosimilar Antitrust Class Action

By Kevin E. Noonan --

On June 10th, Judge Manish S. Shah, U.S. District Court Judge for the Northern District of Illinois, dismissed (without prejudice) a class action lawsuit against AbbVie and AbbVie Biotechnology Ltd. by consumer groups, drug wholesalers, and unions (including the City of Baltimore, Miami Police Department insurance trust fund, and a Minnesota-based employee welfare benefits plan for workers in the pipe trade industries), alleging antitrust violations under Sections 1 and 2 of the Sherman Antitrust Act, as well as corresponding state law causes of action for Alaska, California, District of Columbia, Georgia, Illinois, Nevada, New Hampshire, North Carolina, Utah, and West Virginia, over AbbVie's blockbuster biologic drug, Humira.

Humira (adalimumab) is the world's most valuable biologic drug, having sales of $56 billion from 2012-2018.  Originally approved for rheumatoid arthritis, AbbVie has since obtained FDA approval for treatment of a variety of human autoimmune disorders (including Crohn's disease and plaque psoriasis according to the Opinion and Order).  Facing expiration of the patent on the adalimumab molecule (U.S. Patent No. 6,090,382) on December 31, 2016, AbbVie embarked on a successful campaign (247 patent applications, resulting in 132 patents, which the opinion characterizes as a .534 "batting average") to obtain additional patents on ancillary aspects of the technology, including formulation and manufacturing methods.  Plaintiffs alleged that because some (almost half) of these applications (continuations of earlier-filed applications) were filed two years after Humira was first marketed they should be invalid as being anticipated by earlier Humira-related patents.  (Plaintiffs noted that 5 AbbVie patents were challenged by inter partes review, with 3 being invalidated and AbbVie abandoning the other two before judgment.  AbbVie noted that IPRs against 13 other of its patents were unsuccessful.)  Plaintiffs also alleged inequitable conduct in AbbVie's acquisition of some of these patents, based on prior use of claimed manufacturing methods and failure to disclose these uses to the U.S. Patent and Trademark Office.

Nevertheless, this "patent thicket" was very effective, and in 2019 several biosimilar applicants, including Amgen (Amjevita), Samsung Bioepsis (Hadlima), and Sandoz (Hyrimoz), (as well as Mylan (Hulio), Fresenius (Idacio), Momenta (subsequently abandoned development), Pfizer (Abrilada), Coherus (CHS-1420), and Boehringer (Cyltezo), non-defendants in this action), entered into an agreement wherein AbbVie licensed them to enter the market with their Humira biosimilars in Europe in October 2018, and in the U.S. in January 2023.  While these dates were earlier than any likely date for biosimilar entry even assuming all of AbbVie's patents that could be asserted were  either found invalid, unenforceable, or not infringed, nevertheless the class attempted through antitrust law to get a judgment that would provide Humira biosimilar market access even more quickly.

In dismissing the complaint under Ashcroft v. Iqbal and Bell Atl. Corp. v. Twombly, Judge Shah set forth Plaintiffs' allegations in a manner consistent with the requirement that "a court must accept all factual allegations in the complaint as true and draw all reasonable inferences in plaintiffs' favor."  These include:

• that AbbVie "cornered the market" on Humira (and other, unnamed biosimilar drugs) by "anticompetitive conduct";

• that AbbVie obtained and asserted patents "to gain the power it needed to elbow its competitors" out of the Humira market;

• that AbbVie then entered into agreements with those competitors "to keep their competing drugs off the market" (and then, paradoxically, "gave those competitors permission to market their drugs in Europe"; unremarked is that AbbVie gave those same competitors permission to enter the U.S. market a few years thereafter, without having to face those dastardly and profuse patents).

While setting forth Plaintiffs' allegations bluntly, Judge Shah's decision was balanced in this regard; while noting in the first line of the opinion that "Defendant AbbVie Inc. makes a lot of money selling the prescription drug Humira," he also notes that "AbbVie's Humira-related patents (more than a hundred) make it difficult (if not impossible) to sell competing drugs" and that "the Food and Drug Administration's lengthy approval process imposes additional costs on competitors hoping to reach the market."  And that "a third reason might be the expensive, complicated, and contentious patent infringement litigation that often follows on the heels of FDA approval."

The Court also noted AbbVie's actions in Europe to avoid adverse judicial verdicts and take advantage of "a more fractured patent system (and a type of European patent application similar to the continuation application, known as a "divisional application") to retain patent rights to assert against biosimilar applicants.  While not relevant to the antitrust issues before the Court, Plaintiff made these allegations to characterize AbbVie as a "bad actor."

Judge Shah rebuts these arguments (with additional details as set forth below) efficiently:

Plaintiffs say that AbbVie's plan to extend its power over Humira amounts to a scheme to violate federal and state antitrust laws.  But what plaintiffs describe is not an antitrust violation.  AbbVie has exploited advantages conferred on it through lawful practices and to the extent this has kept prices high for Humira, existing antitrust doctrine does not prohibit it.  Much of AbbVie's petitioning was protected by the Noerr–Pennington doctrine, and plaintiffs' theory of antitrust injury is too speculative.

The Judge set forth the following reasoning in support of his legal conclusions.  The complaint sounded in antitrust law under the Sherman Antitrust Act, §§ 1 and 2, as well as state antitrust law claims.  The Sherman Act Section 1 Count was asserted under a "pay-for-delay" theory against AbbVie, AbbVie Biotechnology, and the three biosimilar applicants (Amgen, Samsung Bioepsis, and Sandoz).  Count 3 was also alleged against all Defendants, based on a market allocation agreement theory under § 1.  Count V asserted Section 2 violations against AbbVie alone.  Counts II, IV, and VI alleged state law claims on grounds analogous to the Federal Sherman Act Counts, and Count VII against AbbVie alleged state law unfair competition laws.

With regard to the Sherman Act § 2 allegations against AbbVie, the Court agreed with AbbVie that "there is nothing illegal about amassing a broad portfolio of legitimate patents."  To the extent that some of these patents turn out to be improvidently granted, "the Noerr–Pennington doctrine immunizes them from liability."  Regarding the Section 1 allegations, the Court similarly agreed with Defendants that these settlement agreements don't violate the Sherman Act because "they[] allow AbbVie's competitors to enter the market before the expiration of AbbVie's patents, do not involve any reverse payments from AbbVie (the patentee) to Amgen, Samsung Bioepis, and Sandoz (the alleged infringers), and only divvy up the market in ways consistent with AbbVie's patent rights."  Finally, the Court agreed that even if a single one of AbbVie's patents are not invalid and infringed that would have been sufficient to keep the biosimilar applicants from marketing Humira biosimilars until that patent expired (a date that would have been very much later than January 2023).  For Plaintiffs' antitrust allegations to create liability against Defendants, Plaintiffs would need to show that AbbVie had obtained each and every one of its patents "unlawfully," which the Court found was unlikely, as a "but-for" cause of Plaintiffs' alleged injury.

One basis for the Court's decision to dismiss was that Plaintiffs' complaint comprised "a new kind of antitrust claim."  The Court's basis for this characterization is that the Sherman § 2 allegations, which while analogous to the grounds of antitrust liability found in Walker Process Equip., Inc. v. Food Mach. & Chem. Corp. and to Prof'l Real Estate Inv'rs, Inc. v. Columbia Pictures Indus., Inc. regarding the exemption from Noerr–Pennington immunity raised by an objectively baseless assertion of an invalid patent, Plaintiffs had disclaimed those grounds of legal remedy.  Moreover, the Sherman § 1 allegations were grounded in F.T.C. v. Actavis, Inc., despite the fact that there had been no reverse payment from AbbVie to any of the biosimilar applicants.  In the Court's view, "[t]he complaint brings together a disparate set of aggressive but mostly protected actions to allege a scheme to harm competition and maintain high prices.  The allegations—even when considered broadly and together for their potential to restrain trade—fall short of alleging the kind of competitive harm remedied by antitrust law."

Turning to the specific deficiencies of each of Plaintiffs' allegations of Sherman Act violations, the Court first plumbed the bases of liability under Section 2 as pled by Plaintiffs.  The opinion sets forth the elements of such a violation:  "a plaintiff must allege '(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident'" citing United States v. Grinnell Corp.  The opinion summarizes Plaintiffs' argument in support of this allegation to be that "AbbVie abused its monopoly over the U.S. market for adalimumab . . . when it gummed up progress toward lower prices by obtaining and asserting "swaths of invalid, unenforceable, or noninfringed patents without regard to the patents' merits" (the "patent thicket" argument).  These allegations did not include that AbbVie had obtained its patents by "knowing and willful fraud" nor that asserting these patents in biosimilar litigation was objectively baseless.

The opinion recognizes the equitable basis for Plaintiffs' argument as being "when a patentee acquires and asserts whole tracts of questionable patents as part of a bad-faith, intentional effort to prop up the market for an existing, expiring patented product," then "petitioning the government (during patent prosecutions, the FDA approval process, and in the courts) can violate the antitrust laws if, in reality, that petitioning is nothing more than a sham meant to inhibit competition," citing California Motor Transport Co. v. Trucking Unlimited for the premise that the Noerr–Pennington doctrine does not immunize activities that are "means or the pretext for achieving substantive evils which the legislature has the power to control."  But the Court also recognized that "because immunized conduct cannot be aggregated with nonimmunized conduct without nullifying the immunity, it is necessary to identify protected and unprotected conduct," citing Mercatus Grp., LLC v. Lake Forest Hosp., and that, ultimately, informs the Court's decision that Plaintiffs should not be permitted to pursue their cause of action under the theories pled in their complaint.

Specifically, a recently decided case -- U.S. Futures Exch., L.L.C. v. Bd. of Trade of the City of Chicago, Inc. -- held that the objectively baseless prong of the test for vitiating Noerr–Pennington immunity is not satisfied "merely by showing that its competitor's purposes were to delay the plaintiff's entry into the market," which was the basis for Plaintiffs' allegations here.  The opinion states that "AbbVie's conduct is protected by Noerr–Pennington (and not subject to antitrust scrutiny) unless its petitions—its patent applications, patent dance exchanges, and the lawsuits that followed—were objectively baseless," and assertions of "numerous flaws" in AbbVie's patents is not enough to amount to their assertion being objectively baseless.  Moreover, the Court is not convinced in view of the 53.4% allowance rate, which the Court believes "compels the conclusion, as a matter of law, that more than half of AbbVie's patent applications were not objectively baseless" under U.S. Futures Exch.  This conclusion is supported by case law from other Circuits where similar success rates led to the conclusion that assertion thereof was not objectively baseless.  This conclusion was bolstered by AbbVie's success before the PTAB in IPRs, where 13 of 18 challenged patents were upheld.  And although the Court did ascertain that some of the patent assertions made by AbbVie during the biosimilar "patent dance" and subsequent litigation may have been objectively baseless, "a settlement that provides substantial value to an antitrust defendant accused of initiating that lawsuit as a sham [which was the case here] is objectively reasonable," citing New W., L.P. v. City of Joliet (the Court citing the benefits of the settlements for Plaintiffs and that the settlements "required concessions from both sides').

Taking these considerations into account, the Court concluded that:

[T]he vast majority of the alleged scheme is immunized from antitrust scrutiny, and what's left are a few sharp elbows thrown at sophisticated competitors participating in regulated patent and biologic-drug regimes.  Some of AbbVie's conduct was not immunized by the Noerr–Pennington doctrine—including what plaintiffs allege to be the heart of their monopolization claim—but much of what preceded and followed that conduct was immunized, which makes the entirety of alleged monopolization scheme immune, because plaintiffs' theory depends on all the components of AbbVie's conduct as the means to suppress competition.

The Court also distinguished Plaintiffs' novel antitrust liability theory here with cases where a court has found "a series of allegedly sham petitions" because in this case the patent system was involved.  Although the Court is cognizant that patenting does not provide blanket antitrust immunity and the patent system is not perfect, the opinion rejects using antitrust law to "launch a collateral attack" on AbbVie's patents and related adjudicative proceedings before the Patent Office and the district courts.

Finally, the Court failed to recognize any antitrust injury based on Plaintiffs' Section 2 allegations because "it is not plausible that AbbVie's nonimmunized conduct intimidated the other defendants into delaying the launch of their biosimilars (or otherwise caused any antitrust injury)."

Turning to the allegations based on Section 1 of the Sherman Act, the opinion sets out what is required for a well-pleaded complaint:  "[i]n order to state a claim under § 1, plaintiffs must plead '(1) a contract, combination, or conspiracy; (2) a resultant unreasonable restraint of trade in [a] relevant market; and (3) an accompanying injury,'" citing Deppe v. Nat'l Collegiate Athletic Ass'n, which are assessed under one of three categories of analysis: "per se, quick-look, and rule of reason," citing Agnew v. Nat'l Collegiate Athletic Ass'n.  The opinion quickly rejects a per se analysis because the agreements are not "facially anticompetitive" (not involving price-setting or the quantity of Humira each defendant could sell), and the Court notes that even frank "pay-for-delay" agreements are not per se anticompetitive under FTC v. Actavis.

Regarding Plaintiffs' market allocation argument (wherein Europe and the U.S. comprise the allocated markets), the Court once again considers the influence of patents, which permit the patentee to selectively license in different territories, citing Dunlop Co. v. Kelsey-Haynes Co.  And the Court notes that per se analysis is disfavored when a Court considers novel antitrust liability theories as pled by Plaintiffs.

The Court also rejects the "quick look" analysis, based on whether "an observer with a rudimentary understanding of economics would []conclude that the agreements have an anticompetitive effect," citing California Dental Ass'n v. F.T.C.  "Even if the rudimentary economist is informed that most of the patents are likely invalid and uninfringed and being asserted without regard to their validity, there are still legitimate, procompetitive justifications for the agreements that require full rule of reason analysis (for instance, the agreements provide certainty to both parties and avoid further litigation costs)" according to the opinion.

Thus the Court concludes that the "rule of reason" approach is the best analytical tool, consistent with FTC v. Actavis for pay-for-delay or reverse payment settlements.  However, using this analysis the Court found that the settlements here fit into the "important exception" to antitrust liability in settlement agreements: "[p]arties remain free to settle on other terms—for example, 'by allowing the generic manufacturer to enter the patentee's market prior to the patent's expiration, without the patentee paying the challenger to stay out prior to that point.'"  And the Court notes an important distinction with FTC v. Actavis: there, under the 180-day exclusivity provisions of the Hatch-Waxman Act the patent holder and the first-to-file generic drug maker shared market exclusivity.  Here, in contrast, not just Amgen but all the other settling defendants were able to enter the market competitively.  Accordingly, "the package of global patent settlements were not an Actavis-like unlawful reverse-payment" and the differential market entry dates between Europe and the U.S. are permissible under Actavis.  On this motion to dismiss, the Court asked "whether the complaint alleges a patent settlement that has Actavis-like anticompetitive features and that warrants further scrutiny under the rule of reason," deciding that it did not.

Finally the Court considered whether the complaint asserts facts amounting to antitrust injury, concluding that it does not.  There is "no hard-and-fast rule" against deciding the antitrust injury question on the pleadings, according to the opinion, but "[d]ismissal is appropriate if the claim 'rests at bottom on some abstract conception or speculative measure of harm,'" citing Associated Gen. Contractors of California, Inc. v. California State Council of Carpenters.  The antitrust injury here is "monopoly pricing" under two allegations: first, that "if the biosimilar manufacturers had pursued the underlying infringement suits, they could have prevailed and, by invalidating the patents that were preventing them from entering the market, entered the market even sooner than they are now able to under their settlement agreements, driving prices down."  Second, if AbbVie had limited assertion of its patents to those not invalid and infringed, the biosimilar applicants would have been able to negotiate more favorable settlement terms.  The Court found these allegations of "what might have happened in the underlying infringement litigation [to be] too speculative and would require legal and factual determinations that go beyond judicially manageable limits," citing Associated Gen. Contractors of California.  These allegations describe "a world where [this] might have happened" but what is conceivable "falls short of plausible" which is required for establishing antitrust injury at the pleadings stage.  "[I]t only takes one valid, infringed patent to render all the rest—whether invalid, infringed, or not—irrelevant for purposes of cause-in-fact analysis," according to the opinion. And further, "[i]f the reason the biosimilar manufacturers could not make it to market was that AbbVie had a patent that prevented them from doing so, it was the patent—and not AbbVie's other conduct—that was the but-for cause of the monopoly prices."

The Court finds Plaintiffs' allegations of patent invalidity to be inadequate because AbbVie needed to be able to assert but one not invalid, infringed patent to avoid antitrust liability.  The Court also considered the temporal aspects affecting competition, because "litigation takes time" and for "complex patent portfolios, it can take a lot of time."  And the timing of litigation between AbbVie and the different biosimilar applicants was not consistent with (and is frankly speculative about) earlier market entry than January 2023 under the settlement agreements that Plaintiffs' allege are anticompetitive.

The Court concludes this section of its opinion by stating:

Antitrust injury is a prerequisite for all of plaintiffs' federal antitrust claims against not only AbbVie but also defendants Amgen, Samsung Bioepis, and Sandoz.  Because plaintiffs have failed to plausibly allege that the but-for cause of Humira's monopoly prices was the biosimilar manufacturers' failure to pursue infringement litigation to its conclusion, AbbVie's unlawful assertion of its patent thicket, or the biosimilar manufacturers' failure to use the leverage that they apparently didn't know they had to reach an agreement to enter the market sooner than they did, all of the federal antitrust claims in the complaint fail.

The  Court then applied the same reasoning to the state law-based Counts and found them similarly lacking, based on the parties' acquiescence that if the Federal law claims are dismissed the state law claims should be as well.  And finally, the Court dismissed Count VII as to "unconscionable and unfair" conduct for failure to give adequate notice of the claim absent the antitrust allegations that the Court considered inadequate.

The interplay between patent law and antitrust law is complex (see, e.g., Antitrust Issues in Intellectual Property Law).  There has been a great deal of angst and upset regarding the Court's decision to dismiss, based on a concern that dismissal puts the Court's imprimatur on AbbVie's strategic behavior (no matter what one may think about it), and that this will chill biosimilar entry.  These sentiments, while perhaps understandable, ignore the outcome:  more than half a dozen biosimilar applicants will bring their biosimilar Humira to market many years earlier than would have happened had the parties engaged in multiple litigations over multiple rounds of the patent dance as provided by the statute.  What Judge Shah's decision means is that antitrust law has established standards in the pharmaceutical context for what constitutes antitrust behavior that can be applied without resource, as here, to novel theories of antitrust liability.  By dismissing without prejudice the Court has given the Plaintiffs an opportunity to bring their case according to these standards.  Whether doing so will promote the cause and goals of bringing biosimilar drugs to market more quickly is less certain.

Supreme Court Grants Certiorari to Review Computer Fraud and Abuse Act Prohibition on "Exceeding Authorized Use"

By Joshua Rich --

The Computer Fraud and Abuse Act ("CFAA") is a Federal criminal statute intended to protect government and other "protected computers" from hacking.  Among other things, the CFAA serves as the basis for punishing anyone who "intentionally accesses a computer without authorization or exceeds authorized access, and thereby obtains . . . information from any protected computer."[1]  But the provision on exceeding authorized access has been extremely controversial, in part because it allows private companies to shape the contours of criminal law through their terms of service.  That controversy has led to a split between the Federal circuit courts on the breadth of the provision, one that the Supreme Court has now agreed to decide through Van Buren v. United States, 940 F.3d 1192 (11th Cir. 2019), cert. granted, __ U.S. __ (2020).

In enacting the CFAA in 1986, Congress sought to address the scourge of hackers who had become able to "trespass into" public and private computer systems.  The Act, codified at 18 U.S.C. § 1030, included provisions that would protect against "outside" hackers (those who access a computer without authorization) and "inside" hackers (those who exceed authorized access).  The CFAA prohibits hackers from accessing government computers, computers used by banking institutions, and "protected computers."  Under § 1030(e)(2)(B), however, the term "protected computer" includes any computer "which is used in or affecting interstate or foreign commerce or communication, including a computer located outside the United States that is used in a manner that affects interstate or foreign commerce or communication of the United States" -- today, any computer linked to the internet.  And the term "exceeds authorized access" means "to access a computer with authorization and to use such access to obtain or alter information in the computer that the accesser is not entitled so to obtain or alter."[2]

The U.S. Courts of Appeals have split on whether a person "exceeds authorized access" if he or she is entitled to access under certain conditions (for example, within their scope of employment), but instead accesses that information for an improper purpose.  In the Second, Fourth, and Ninth Circuits, obtaining the information for an improper use would not constitute a violation of the CFAA.[3]  In the First, Fifth, Seventh, and Eleventh Circuits, however, there are circumstances under which it may be.[4]  Thus, in some states, accessing information for an improper purpose is a crime; in others, it isn't.  The Supreme Court's decision will remedy that split.

The "exceeds authorized access" provision is notorious as well because of its part in the death of Aaron Swartz.  Mr. Swartz, a coding savant who was one of the founders of Reddit, was a long-time believer in open access to information on the internet.  He first downloaded and made public for free 2.7 million documents from PACER, the Federal court filing system that normally charges per page.  The Administrative Office of the United States Courts expressed concern that his actions exceed his authorized access.  Emboldened by an FBI investigation that led to no criminal charges, Mr. Swartz went to MIT -- which prided itself on its open campus -- and used the school's network to access JSTOR (a digital repository to which he had access as a research fellow at Harvard University) and download hundreds of thousands of academic journal articles with the intent to make them freely available.  This time, JSTOR complained that his actions exceeded his authorization under its terms of service and Mr. Swartz was criminally charged.  Mr. Swartz was indicted on thirteen counts (including ten under the CFAA) and threatened with 50 years imprisonment in what was later seen as "overcharging" and overzealous prosecution.  After the U.S. Attorney refused to budge from a requirement that Mr. Swartz serve time in prison, he died by suicide.

The Van Buren case that the Supreme Court chose to review involves a clear violation of the "exceeds authorized access" provision, if that provision covers situations in which the accesser is entitled to access the information but does so for an improper purpose, and a sordid situation to boot.  Nathan Van Buren was a sergeant on the police force of Cumming, Georgia, a small town in the exurbs of Atlanta.  Van Buren met Andrew Albo, a widower in his sixties who took an unseemly interest in young women -- including underage girls and prostitutes -- when he was arresting Albo for providing alcohol to a minor.  Van Buren was in financial distress and saw an opportunity to shake Albo down.  Van Buren asked Albo for a "loan" of over $15,000 for fictitious medical expenses; Albo recorded the request and went to the Forsyth County Sheriff's Office, who involved the FBI.  The FBI set up a sting:  Albo would tell Van Buren that he had met a woman at a strip club and wanted to make sure she was not a police officer, and would provide Van Buren with money in exchange.  Ultimately, Van Buren "ran" the license plate numbers that Albo had gotten from the FBI in the Georgia Bureau of Investigation's Georgia Crime Information Center ("GCIC").  As a police officer, Van Buren was empowered to search the GCIC for official business, but not for personal reasons.

After Van Buren ran the plate numbers in the GCIC, the FBI and GBI showed up at his home.  He admitted that he had made up the story about medical expenses, had received money from Albo, ran the license plate search in the GCIC, and knew that what he was doing was wrong.  He claimed the money from Albo was a "gift," but when asked if he received anything in exchange for the search, answered, "I mean he did give me $1,000."  Van Buren was then indicted, tried, and convicted on one count of honest-services wire fraud and one count of felony computer fraud under the CFAA.  Upon appeal, the U.S. Court of Appeals for the Eleventh Circuit vacated the honest-services conviction based on improper jury instructions and remanded that count for re-trial.  On the CFAA count, the Eleventh Circuit upheld the conviction, even over a challenge that the CFAA did not encompass misuse of a computer by a person who had authority to access it for other reasons.

In addressing Van Buren's appeal on the CFAA count, the Eleventh Circuit noted that while the appeal was styled as an attack on the sufficiency of the evidence, it was actually a request to overrule the Eleventh Circuit's precedent in United States v. Rodriguez, 628 F.3d 1258 (11th Cir. 2010).  In that case, the defendant had been an employee of the Social Security Administration ("SSA") who accessed the SSA database to find personal information (including the addresses) of his ex-wife, an ex-girlfriend, the ex-girlfriend's father, former co-workers and their family members, and numerous other acquaintances.  Rodriguez argued that he had not violated the CFAA because "he accessed only databases he was authorized to use," even if for improper purposes.  He argued that the Eleventh Circuit should follow the Fifth and Ninth Circuit decisions, but the Eleventh Circuit disagreed with their interpretation of the language of the statute.  The Van Buren court noted that other courts had disagreed with the Rodriguez decision, but it was constrained by the prior-precedent rule to follow the prior Eleventh Circuit holding.  Thus, it applied the Rodriguez decision's holding and found that permitted access that was made for an impermissible purpose violated the CFAA.

The question the Supreme Court has been asked to resolve is quite simple:  "Whether a person who is authorized to access information on a computer for certain purposes violates Section 1030(a)(2) of the Computer Fraud and Abuse Act if he accesses the same information for an improper purpose."  The implications, however, are quite far-reaching.  The CFAA is both a civil and a criminal statute.  On one hand, there should be law -- and preferably, a Federal law -- that prohibits police officers from taking advantage of their positions to obtain information for corrupt purposes.  On the other hand, making any improper use of a computer a violation of the CFAA will encompass anyone using their work computer to check sports scores, shop online, or look for a new job.  It doesn't seem appropriate that such minor (and common) dalliances should be potentially subject to either criminal or civil liability.  But while such a charge would not arise under current DOJ Guidelines and is unlikely for an employer to raise, it is at least a potential outcome that has been raised by certain appellate courts and could result from the Court's consideration of the proper scope of the CFAA.

[1] 18 U.S.C. § 1030(a)(2)(C).

[2] 18 U.S.C. § 1030(e)(6).

[3] See United States v. Valle, 807 F.3d 508 (2d Cir. 2015); WEC Carolina Energy Sols. LLC v. Miller, 687 F.3d 199 (4th Cir. 2012); United States v. Nosal, 676 F.3d 854 (9th Cir. 2012) (en banc).

[4] See EF Cultural Travel BV v. Explorica, Inc., 274 F.3d 577 (1st Cir. 2001); United States v. John, 597 F.3d 263 (5th Cir. 2010), cert. denied, 568 U.S. 1163 (2013); Int'l Airport Ctrs., L.L.C. v. Citrin, 440 F.3d 418 (7th Cir. 2006); United States v. Rodriguez, 628 F.3d 1258 (11th Cir. 2010).  The CFAA questions in EF Cutural Travel and Citrin arose in civil cases, not in the criminal context.

Allen v. Cooper (2020)

By Kevin E. Noonan --

In a decision containing not a small amount of whimsy (more regarding that aspect anon), Justice Kagan, joined almost unanimously by her brethren today upheld a State's (here, North Carolina) sovereign immunity against suit for copyright infringement, in Allen v. Cooper.

The case (and the whimsy) arose over Petitioner Allen's suit against North Carolina's unauthorized use of copyrighted materials relating to the discovery and salvage of the pirate Blackbeard's "flagship" Revenge off the coastal waters of that state and, hence, being State property.  Petitioner relied on the provisions of the Copyright Remedy Clarification Act of 1990 (CRCA), codified at 17 U. S. C. § 511:

[A] State "shall not be immune, under the Eleventh Amendment [or] any other doctrine of sovereign immunity, from suit in Federal court" for copyright infringement.  17 U. S. C. §511(a).  [I]n such a suit a State will be liable, and subject to remedies, "in the same manner and to the same extent as" a private party. §511(b).

North Carolina asserted sovereign immunity under the Eleventh Amendment:

The Judicial Power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of an- other State, or by Citizens or Subjects of any Foreign State.

The District Court found for plaintiff, based on the express provisions of the CTCA, and on Section 5 of the Fourteenth Amendment, in view of the "the States' 'pattern' of 'abus[ive]' copyright infringement."  The Fourth Circuit reversed, based on the Supreme Court's decision in Florida Prepaid Postsecondary Ed. Expense Bd. v. College Savings Bank, 527 U. S. 627 (1999), holding the Patent Remedy Act, enacted by Congress on the same day and having substantially the same provisions.

The Court affirmed, in a decision by Justice Kagan and joined by the Court with the exception of two portions of the opinion in which Justice Thomas did not join; in addition, Justice Breyer wrote a concurring opinion joined by Justice Ginsberg.  The opinion noted that the express language of the Eleventh Amendment is not unequivocal but that sovereign immunity stands for the "presupposition of our constitutional structure which it confirms," citing Blatchford v. Native Village of Noatak, 501 U. S. 775, 779 (1991).  This presumption is, first, that "each State is a sovereign entity in our federal system," citing Seminole Tribe of Fla. v. Florida, 517 U. S. 44, 54 (1996).  Second, "[i]t is inherent in the nature of sovereignty not to be amenable to [a] suit" absent consent, cited in Seminole Tribe relying on The Federalist No. 81, p. 487 (A. Hamilton).  Finally, that "fundamental aspect of sovereignty constrains federal 'judicial authority'" according to the Court, citing Blatchford.

The immunity is not absolute and the Court has recognized exceptions, in instances where Congress enacts a statute having "unequivocal statutory language" that abrogates a State's sovereign immunity (citing Dellmuth v. Muth, 491 U. S. 223, 228 (1989)) and there is some constitutional provision that excuses Congress's encroachment on sovereign state prerogatives (citing Kimel v. Florida Bd. of Regents, 528 U. S. 62, 78 (2000)).  In this case the first prong of the test was indisputably met.  As for the second prong, Petitioner relied on Congress's Article I power to grant copyrights, and the Fourteenth Amendment's grant to Congress of the power to enforce the Amendment's due process provisions.

The Court rejected these arguments, the opinion stating that "[t]he slate on which we write today is anything but clean."  The Article I power to grant copyrights (and patents) "impose a corresponding duty (i.e., not to infringe) on States no less than private parties," according to the Court, citing Goldstein v. California, 412 U. S. 546, 560 (1973).  Hence, abrogation of North Carolina's sovereign immunity is the best, or only, way to protect Petitioner's copyright (according to Petitioner).  But, the opinion asserts, "[t]he problem for Allen is that this Court has already rejected his theory, in Florida Prepaid.  While that case involved Congress's failed attempt to abrogate State sovereign immunity for patent infringement, the constitutional basis for copyright protection arises in in the same provision of Article I as patent protection (Section 8, clause 8) and thus that decision mandates the Court's opinion here.  The Court noted that the justifications for stripping States of sovereign immunity in Florida Prepaid for patents were the same as asserted here:  "to ensure 'uniform, surefire protection' of intellectual property."  While acknowledging that this was a "proper Article I concern," the opinion reiterates the holding of Florida Prepaid that it isn't enough to satisfy the second prong, that there is a constitutional provision supporting this exercise of federal power, based on the Court's decision in Seminole Tribe v. Florida.  The rubric from the case is that Congress does not have the power, under Article I, to "circumvent" the limitations sovereign immunity places on federal jurisdiction.  As stated in the opinion, "the power to 'secur[e]' an intellectual property owner's 'exclusive Right' under Article I stops when it runs into sovereign immunity."

The Court also rejected Petitioner's argument that Central Va. Community College v. Katz provided "an exit ramp" from the Florida Prepaid precedent.  546 U. S. 356, 359 (2006).  Katz involved the Bankruptcy Clause, which the Court decided enabled Congress to compel states to participate in bankruptcy proceedings.  But the opinion notes that the Court had expressly exempted bankruptcy proceedings from Seminole Tribe's general rule.  The Court refused here to extend "bankruptcy exceptionalism" to the Copyright Clause.  Bankruptcy proceedings were "in rem" according to the Court, and accordingly "it does not implicate States' sovereignty to nearly the same degree as other kinds of jurisdiction," citing Katz.  In addition, the Court in Katz found that bankruptcy proceedings and the Bankruptcy Clause had a "unique history" that produced in the Court "a felt need to curb the States' authority."  This need stemmed from the "wildly divergent schemes" different States had at the founding of the Republic for discharging debt in bankruptcy and that the States at that time had a history of not respecting discharge orders from other states.  As is its wont, the Court reverted to the origins and purposes (the Framers' intentions) of the Bankruptcy Clause for justification for its distinction.  And the Court in Katz had found that by ratifying the Constitution, the States had agreed to yield their sovereign immunity (in view of the language of the Bankruptcy Clause itself); because a State can always waive its immunity any apparent inconsistency was thus resolved.

Florida Prepaid, and stare decisis, were enough in the Court's view to determine the outcome here, because finding abrogation of North Carolina's sovereign immunity would be directly contrary to affirming Florida's sovereign immunity in the Court's earlier precedent.  The only way to abrogate sovereign immunity in this case would be to overrule the Court's recognition of Florida's sovereign immunity.  Calling stare decisis a "foundation stone of the rule of law" (and citing Michigan v. Bay Mills Indian Community, 572 U. S. 782, 798 (2014), a case on Indian tribe immunity for the principle), the opinion states that there must be a "special justification" for doing so (as well as a belief that the earlier case had been wrongly decided), which the Court did not find here.

Regarding Section 5 of the Fourteenth Amendment, the Court recognized that the Amendment "fundamentally altered the balance of state and federal power," citing Seminole Tribe, and that the Court has held that (under the right circumstances) the this Amendment gives Congress the power to abrogate State sovereign immunity, citing Fitzpatrick v. Bitzer, 427 U. S. 445, 456 (1976).  But this power is limited:  for example, it must be tailored to "remedy or prevent" State conduct that violates the Amendment's due process guaranties, citing City of Boerne v. Flores, 521 U. S. 507, 519 (1997).  The Court has fashioned a "means-ends test" in this regard, wherein "Congress can permit suits against States for actual violations of the rights guaranteed in Section 1" of the Amendment.  The Court requires a "congruence and proportionality between the injury to be prevented or remedied and the means adopted to that end."  But the limits on this grant of power are what the amendment actually bars, which are violations of due process.  In this case, the question the Court apprehends is "[w]hen does the Fourteenth Amendment care about copyright infringement?" finding the answer is "sometimes," particularly when States deprive a citizen of property without due process of law.  But "sometimes" does not mean "always," according to the opinion, excluding for example instances of negligence, citing Daniels v. Williams, 474 U. S. 327, 328 (1986).  Copyright infringement must be intentional, or at least reckless, for the due process protections of the Fourteenth Amendment to come to bear, and only where the State does not offer a remedy for the infringement, citing Hudson v. Palmer, 468 U. S. 517, 533 (1984).

In resolving the question before it regarding the Fourteenth Amendment, the Court once again turned to its decision in Florida Prepaid, as defining unconstitutional infringement to be "intentional conduct for which there is no adequate state remedy."  In that case, "the statute's abrogation of immunity [the Patent Remedy Act], the equivalent of the CRCA's—was out of all proportion to what it found [in the legislative history]."  This was because, inter alia, "Congress did not identify a pattern of unconstitutional patent infringement" (indeed, the Court characterized the evidence as "thin," amounting to only two examples in the context of most States complying with the Patent Statute).  In addition, that evidence was that States' infringement was "innocent or at worst negligent" rather than reckless or intentional.  The Court noted that the Patent Remedy Act was disproportionate to the harm that provoked it, stating "it exposed all States to the hilt" of liability for patent infringement.  It was not carefully and narrowly claimed to correct a problem but provided "a uniform remedy for patent infringement."  It did not "enforce" Section 1 (due process) of the Fourteenth Amendment and thus was not "appropriate" for enforcing the Amendment under Section 5.

In view of the "identical scope" of the statute at issue here the Court rhetorically asks "[c]ould . . . this case come out differently" (and answering "no") unless there was stronger evidence of intentional or reckless (i.e., unconstitutional) infringement.  In this case there was a greater quantum of evidence supporting State infringement of copyrights (including a 155-page report from the Register of Copyrights).  But the Court held that even this wasn't enough.  The Court found the evidence "scarcely more impressive" ("only a dozen possible examples of state infringement" and "seven court cases brought against States" as well as "five [uncorraborated] anecdotes taken from public comments") than the evidence for States' patent infringement in Florida Prepaid.  And only two of these examples raised any due process issues.  Under this analysis the Court found that this statute failed the "congruence and proportionality" test and the outcome could not differ from the Court's earlier decision in Florida Prepaid.

The opinion concludes with the Court suggesting that Congress could pass a statute abrogating State sovereign immunity.  Noting that Congress passed both the Patent Remedy Act and the CRCA prior to the Court's decision in Seminole Tribe, the opinion suggests that "Congress will know the rules" regarding "the importance of linking the scope of its abrogation to the redress or prevention of unconstitutional injuries—and of creating a legislative record to back up that connection" should Congress decide to pursue another statute to abrogate State sovereign immunity.  Such a "tailored statute" could "effectively stop States from behaving as copyright pirates" and, as a consequence, "bring digital Blackbeards to justice."

Justice Thomas wrote separately in concurrence, joining all but two sections of the Court's opinion and raising a question he believes unsettled in the law.  Regarding the first of these section of the opinion, regarding stare decisis, the Justice believes that the Court has a responsibility to overrule earlier precedent for error without requiring "special justifications" as discussed in the opinion.  His second disagreement involved the opinion's discussion of the possibility of future legislation abrogating State sovereign immunity; here the Justice thinks such talk goes beyond the Court's role to provide opinions "only [on] the case before us in light of the record before us," citing Manhattan Community Access Corp. v. Halleck, 587 U. S. ___, ___ (2019) (slip op., at 15).  As for the question, Justice Thomas is not convinced that "[c]opyrights are a form of property."

Justice Breyer also wrote a concurring opinion, joined by Justice Ginsberg.  The gist of the concurring opinion (also colorfully set forth) is that the Court's decision in Florida Prepaid was incorrect, and setting forth the Justice's more fulsome explication of his views in Justice Stevens' dissent in Florida Prepaid and the Court's opinion in Kimble v. Marvel Entertainment, LLC, 576 U. S. 446, 455–456 (2015), as well as his own dissent in Franchise Tax Board of California v. Hyatt, 587 U.S. ___, ___ (2019).

Allen v. Cooper (2020)
Opinion by Justice Kagan, joined by Chief Justice Roberts and Justices Alito, Sotomayor, Gorsuch, and Kavanaugh, joined by Justice Thomas except for the final paragraph in Part II–A and the final paragraph in Part II–B; opinion concurring in part and concurring in the judgment by Justice Thomas; opinion concurring in the judgment by Justice Breyer, joined by Justice Ginsburg

Arctic Cat Inc. v. Bombardier Recreational Products Inc. (Fed. Cir. 2020)

By Kevin E. Noonan --

The patent marking statute, codified at 35 U.S.C. § 287(a) appears straightforward:

Patentees, and persons making, offering for sale, or selling within the United States any patented article for or under them, or importing any patented article into the United States, may give notice to the public that the same is patented, either by fixing thereon the word "patent" or the abbreviation "pat.", together with the number of the patent, or by fixing thereon the word "patent" or the abbreviation "pat." together with an address of a posting on the Internet, accessible to the public without charge for accessing the address, that associates the patented article with the number of the patent, or when, from the character of the article, this can not be done, by fixing to it, or to the package wherein one or more of them is contained, a label containing a like notice.  In the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice.  Filing of an action for infringement shall constitute such notice.

Applying the statute to circumstances can be more complicated when the patented invention is a component of an article in commerce, which was the case in Arctic Cat Inc. v. Bombardier Recreational Products Inc., decided last week by the Federal Circuit, limiting the amount of damages due from an infringer based on this section of the Patent statute.

The case arose over infringement of Arctic Cat's U.S. Patent Nos. 6,793,545 and 6,568,969 by Bombardier, the patents directed to steering systems in personal watercraft (PWC) such as jet skis.  Arctic Cat ceased selling PWC in favor of a licensing agreement with Honda.  This licensing agreement had contained a provision requiring Honda to mark all licensed products sold with appropriate patent numbers, but this provision was not included in the final agreement between the parties.  It was undisputed that Arctic Cat failed to monitor whether Honda was properly marking but not when Honda stopped neglecting this responsibility and began to mark; Arctic Cat asserted September 6, 2013 as the latest date when Honda sold unmarked items while Bombardier alleged Honda sold unmarked PWCs as late as 2018.

A jury found the asserted patents to be infringed and not invalid, and awarded damages calculated from October 16, 2008 (a date 6 years before Arctic Cat filed suit and a little less than five years before Arctic Cat agreed Honda stopped selling unmarked items).  The jury also found that Bombardier's infringement was willful.  In an earlier appeal, Arctic Cat Inc. v. Bombardier Recreational Prods. Inc., 876 F.3d 1350 (Fed. Cir. 2017), the Federal Circuit affirmed the jury's willfulness determination by vacating and remanding on the marking issue for putting the burden on Bombardier to show that unmarked articles did not practice the claimed invention.  Rather, according to that panel, "once an alleged infringer identifies products that it believes are unmarked patented articles subject to the notice requirements of § 287, the patentee bears the burden of proving that the identified products do not practice the claimed invention."  On remand (the subject of this appeal), Arctic Cat moved for summary judgment that it was entitled to "pre-complaint" damages, and that § 287 "did not apply after the time that it alleges Honda stopped selling unmarked products." "More ambitiously," as characterized by the panel opinion, Arctic Cat asserted that the jury's willfulness determination constituted notice and hence it was entitled to the entire period when Bombardier was selling PWCs that infringed the patents in suit under § 286, which constituted a time period when Honda was undisputedly selling unmarked items.  The District Court disagreed and limited the damages awarded not to include damages for pre-complaint sales.

The Federal Circuit affirmed, in an opinion by Judge Lourie joined by Judges Moore and Stoll.  The opinion set forth the principles behind the restriction of damages embodied in § 287, that while a patentee who does not make or sell a patented article can obtain damages for any infringing article, even without notice, when a patentee makes or sells and fails to mark, she cannot collect damages until she either provides actual notice or sues the accused infringer.  This amounted to cure of the neglect of not marking, but it also provides definitive boundaries on when damages can be obtained for infringing activity and when the statute provides that damages cannot be so obtained -- all based on patent marking.  The circumstances in this case were somewhat of an anomaly ("a discontinuous situation") because "unmarked products were sold, such that Arctic Cat could not receive damages before providing notice, but the sales of unmarked products allegedly stopped for a period of time prior to the filing of Arctic Cat's complaint."  As a consequence, the question the Court perceived was presented is "whether the cessation of sales of unmarked products excuses noncompliance with the notice requirement of § 287 such that a patentee may recover damages for the period after sales of unmarked products ceased but before the filing of a suit for infringement," a question having an answer for this panel of "no."

The panel rejected Arctic Cat's statutory interpretation dependent on the statute being written in the present tense, so that ceasing sales of unmarked product would be sufficient to cure.  This comes from the language of the statute according to the opinion, which while casting a patentee's conduct in the present tense, the consequences of failing to mark are not limited in time.  The statutory language "prohibits a patentee from receiving any damages in a subsequent action for infringement after a failure to mark, rather than merely a reduced amount of damages in proportion to the amount of time the patentee was actually practicing the asserted patent" according to the opinion (emphasis added).  The statute imposes an obligation to mark when the patentee (or in this case, its licensee) begins to sell the patented article.  Succinctly, the opinion captures the equities of these responsibilities saying:

The notice requirement to which a patentee is subjected cannot be switched on and off as the patentee or licensee starts and stops making or selling its product.  After all, even after a patentee ceases sales of unmarked products, nothing precludes the patentee from resuming sales or authorizing a licensee to do so.  In the meantime, unmarked products remain on the market, incorrectly indicating to the public that there is no patent, while no corrective action has been taken by the patentee.  Confusion and uncertainty may result.  Thus, once a patentee begins making or selling a patented article, the notice requirement attaches, and the obligation imposed by § 287 is discharged only by providing actual or constructive notice.

The panel also found this interpretation to be consistent with the purpose of the statute:  "(1) helping to avoid innocent infringement; (2) encouraging patentees to give public notice that the article is patented; and (3) aiding the public to identify whether an article is patented," citing Nike, Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437, 1443 (Fed. Cir. 1998), whereas Arctic Cat's interpretation "would undermine those objectives" because it would allow a patentee "to allow a patentee to mislead others that they are free to make and sell an article that is actually patented, but nonetheless allow the patentee to recover damages without undertaking any corrective action."

The Court also rejected Arctic Cat's argument that a finding of willfulness was enough to establish actual notice, not least because "Arctic Cat acknowledges, as it must, that this argument is foreclosed by our precedent" citing Amsted Indus. Inc. v. Buckeye Steel Castings Co., 24 F.3d 178, 187 (Fed. Cir. 1994), and relying on Am. Med. Sys., Inc. v. Med. Eng'g Corp., 6 F.3d 1523, 1537 n.18 (Fed. Cir. 1993).  The distinction drawn by the panel is that "willfulness turns on the knowledge of an infringer, [while] § 287 is directed to the conduct of the patentee" and "[k]nowledge by the infringer is not enough.  Actual notice under § 287 requires performance by the patentee."  Accordingly, the opinion affirmed the District Court's denial of pre-complaint damages.

Arctic Cat Inc. v. Bombardier Recreational Products Inc. (Fed. Cir. 2020)
Panel: Circuit Judges Lourie, Moore, and Stoll
Opinion by Circuit Judge Lourie

The "Ending the Diagnostic Odyssey Act of 2019"

By Kevin E. Noonan --

On January 6, 2020, a bi-partisan coalition of Senators, including Senator Collins (R-ME), Doug Jones (D-AL), Martha McSally (R-AZ), and Bob Menendez (D-NJ), introduced the "Ending the Diagnostic Odyssey Act of 2019" to permit states to use Medicaid funding for whole genome sequencing (WGS) analysis in children having certain rate diseases.  The bill is a counterpart of H.R. 4144, introduced by Rep. Scott Peters (CA-52), joined by Rep. Shimkus and Mr. Vargas, on August 2, 2019.

The stated purpose of the bill is "[t]o enable States to better provide access to whole genome sequencing clinical services for certain undiagnosed children under the Medicaid program" and, of course, "for other purposes."  The bill purports to effectuate this legislative purpose by providing the States with an option to expressly achieve the stated objective.  This is to be done by amending Title XIX of the Social Security Act, codified at 42 U.S.C. ch.7, by inserting new section 1947, which states in pertinent part:

[A] State, at its option as a State plan amendment, may provide for medical assistance under this title to an eligible individual for purposes of providing the individual with whole genome sequencing clinical services.  Sec. 1947 (a)

Section (b) provides authorization for the state to pay a "health care provider" for WGS to an "eligible individual" (defined later in the bill as individuals who are "eligible for medical assistance under the State plan (or a waiver of such plan)" and are under 21 (or 20, 19, or 18 "as the state may choose" and has been "referred or admitted to an intensive care unit, or has been seen by at least 1 medical specialist, for a suspected genetic or undiagnosed disease; or is suspected by at least 1 medical specialist to have a neonatal- or pediatric- onset genetic disease") (Section 1947(f(1)).  During the first 12 fiscal year quarters (i.e., the first three fiscal years), the Federal percentage applicable to these payments would only provide 75% of the costs.  Part of the Federal support for this program includes planning grants (which shall also require a percentage of State matching funds as determined under section 1905(b) of the statute), and the State plan must establish procedures for referring any eligible individual to a health care provider qualified to provide WGS services (Sec. 1947(c)).

The bill also contains requirements for the States (Section 1947(d)) to provide within three years of initiation a program under these provisions of the Act reports to the Administrator of the Centers for Medicare & Medicaid Services and the Administrator of the Health Resources and Services Administration on the extent to which these service "reduce health disparities" (presumably disparities existing between those who can and those who cannot afford WGS services under existing law) and the converse, "the extent to which coverage under the State plan (or a waiver of such plan) impedes the use of genetic and genomic testing that may improve clinical outcomes for eligible individuals enrolled in the State plan (or under a waiver of such plan).  Health care providers (Section 1947(e)) must report to the State "on all applicable measures for determining the quality of such service."  Finally, "whole genome sequencing" is expressly defined as:

[T]he unbiased sequencing of all deoxyribonucleic acid bases in the genome of such individual and, if for the sole benefit of the individual, a biological parent of such individual for the purpose of determining whether one or more potentially disease-causing genetic variants are present in the genome of such individual or such biological parent; and . . . includes any analysis, interpretation, and data report derived from such sequencing.''  (Section 1947(f)(2)).

Senator Collins's Homepage defines the "genetic odyssey" in the bill's title as the delay children with rare genetic diseases endure, which the Senator says last 5-7 years on average.  The tragedy of this odyssey is that many of these children do not live more than 5 years, making the provisions of the bill a life-and-death proposition for them.  According to the website, "[t]here are approximately 7,000 rare diseases known today; approximately 80 percent of rare diseases are genetic, and about one-half of all rare diseases affect children."  The Senator asserts that her bill is supported by over 100 patient advocacy groups, including "the Genetic Alliance, the Parent Project Muscular Dystrophy, Tuberous Sclerosis Alliance, Alström Syndrome International, Epilepsy Foundation, and the Asthma and Allergy Foundation of America."

The bill is expected to be taken up in due course; H.R. 4144 has been referred to the House Committee on Energy and Commerce but the committee has taken no further action since August.

CRISPR Interference Update

By Kevin E. Noonan --

All interferences have filings that are either kept confidential or are entirely procedural in nature.  While there is little substantive to discuss, acknowledging them serves the purpose of keeping track of the proceedings; the following papers have been filed in Interference No 106,115 between Senior Party The Broad Institute, Harvard University, and the Massachusetts Institute of Technology, and Junior Party the University of California, Berkeley, the University of Vienna, and Emmanuelle Charpentier (collectively, "CVC") over patents and applications that disclose and claim eukaryotic cell-embodiments of CRISPR technology:

CVC Protective Order Entered -- December 9, 2019
Broad Notice of Filing Priority Statement -- December 12, 2019
CVC Notice of Filing Priority Statement -- December 12, 2019
Deposition Notice Randall Peterson Ph.D. -- December 12, 2019
Broad Priority Statement Filing -- December 12, 2019
CVC Priority Statement Filing -- December 12, 2019
Broad Notice of Priority Statement Service -- December 13, 2019
CVC Notice of Priority Statement Service -- December 13, 2019
CVC Fourth Updated Notice of Related Proceedings -- December 23, 2019

Dr. Peterson's deposition was scheduled to take place on December 17th and 18th, pursuant to the schedule set forth by the Board's Order (see "CRISPR Housekeeping").

Finally, for now, on December 23rd, CVC provided an updated Notice of Related Proceedings, informing the Board and the Broad of the following newly granted patents (as well as additional pending applications), none of which are involved in this interference:

10,301,651 (USSN 14/685,504); 10,227,611 (USSN 14/042,782); 10,407,697 (USSN 15/435,233); 10,385,360 (USSN 15/925,544); 10,421,980 (USSN 16/033,002); 10,415,061 (USSN 16/033,005); 10,308,961 (USSN 16/033,016); 10,358,658 (USSN 16/201,836); 10,337,029 (USSN 16/201,848); 10,351,878 (USSN 16/201,855); 10,400,253 (USSN 16/276,343); 10,428,352 (USSN 16/276,348); 10,443,076 (USSN 16/276,356); 10,487,341 (USSN 16/277,090); 10,519,467 (USSN 15/803,424); 10,526,619 (USSN 16/380,758); and 10,513,712 (USSN 16/382,093); allowance of USSN 16/380,781; allowance of USSN 16/382,096; allowance of USSN 16/382,097; and allowance of USSN 16/382,100.

Season's Greetings from Patent Docs

The authors and contributors of Patent Docs wish their readers and families a Happy Holidays!  Publication of Patent Docs will resume on December 26th.

The authors and contributors of Patent Docs wish their readers and families a Happy Holidays!  Publication of Patent Docs will resume on December 26th.

Broad Files Reply Brief to Berkeley's Opposition to Substantive Motion No. 1

By Kevin E. Noonan --

In early November, Senior Party the Broad Institute (along with Harvard University and the Massachusetts Institute of Technology) filed their response to Junior Party the University of California/Berkeley, the University of Vienna, and Emmanuelle Charpentier (collectively, "CVC") Opposition to the Broad's Substantive Motion No. 1 in Interference No. 105,166.

Pursuant to the Patent Trial and Appeal Board's rules, the Broad's Reply Brief follows formulaically with Senior Party's point-by-point rebuttal of CVC's grounds for opposition.  CVC's first asserted opposition argument was that "judgment estoppel" (quotation marks in opposition brief) does not exist in any form that would prelude this interference.  The Broad characterizes this argument as "remarkable," and that it "not only displays a lack of understanding regarding the development of the estoppel rule in interferences, but it also misstates common law estoppel principles."  Segueing to the question of "motion estoppel" under Rule 41.127(a), the Broad traces the provisions of this Rule to former Rule 1.658(c), which provided (according to the Broad) for "broad application of estoppel for any type of interference judgment and further listed specific motions that needed to be raised lest motion estoppel apply, including failure to move to add a new claim" (which the Broad argues is the case here).  These considerations did not change with revision of the interference rules, according to the Reply Brief, and thus the Board remains empowered under the rules to grant its motion that CVC should be estopped in this interference by the Board's judgment in the prior interference (No. 105,048).

The brief next argues that Rule 127 applies to judgments of no interference-in-fact, contrary to CVC's argument that it cannot because there is no "losing" party under those circumstances, on the basis that there is no express provision in the Rule to this effect.  According to the Broad, "the first sentence sets out a general rule, while the second sentence applies it to losing parties and sets out an exception for losing parties"; this does not negate application of estoppel to CVC under the circumstances of this interference, according to the Broad.

The Broad takes direct issue with CVC's argument that the PTAB is powerless to apply estoppel here because doing so would be contrary to "common law estoppel principles," saying bluntly (with reference to Wright's Federal Practice and Procedure treatise) that CVC "misapprehends fundamental principles of claim and issue preclusion," specifically that common law estoppel "foreclos[e] any litigation of matters that never have been litigated, because of a determination that they should have been advanced in an earlier suit."  This argument also supports the Broad's rebuttal that 35 U.S.C. § 135(a) "mandates that the PTAB resolve any and all potential priority issues," saying that "the Federal Circuit rejected this argument long ago" citing Eli Lilly & Co. v. Bd. of Regents of Univ. of Washington, 334 F.3d 1264, 1267 (Fed. Cir. 2003).  According to the Broad, "[t]he PTAB thus has the discretion and authority to promulgate rules for discontinuing interferences, including estoppel rules that provide consequences for a party's failure to make timely motions."

The brief then reiterates its argument that CVC had the opportunity (to which it did not avail itself) to add a claim to eukaryotic cell embodiments of CRISPR technology in the '048 Interference (pointing out that CVC had indicated in that prior interference that it "might seek authorization to file such a responsive motion").  Having failed to prevail in that interference the Broad characterizes CVC's position in this interference as attempting to get a "second bite at the apple" that the estoppel rules preclude.  Further, the Broad disputes CVC's argument that it "could not have moved to add a eukaryotic claim in the '048 Interference because it had no allowed eukaryotic claims at that time," asserting that Standing Order ¶ 208.5.1 permits this.  And the Broad rejects CVC's assertion that the Broad could have moved just as well, because Standing Order ¶ 208.5.1 requires the moving party to certify that such a claim was patentable to CVC, which the Broad could not (and certainly would not) do.

Finally in this portion of the brief, the Broad challenges CVC's argument that the "the alleged separate patentability of single-molecule RNA claims" over the Count in the '048 Interference raises a factual issue that precludes the Board from granting the Broad's Substantive Motion No. 1.  Here, the Broad argues that this argument is "legally irrelevant," because CVC had the opportunity to file claims to interfering subject matter (i.e., "eukaryotic claims limited to use of single-molecule RNA") but did not.

Returning to the issue of "judgment estoppel," the brief cites MPEP § 2308(b) for the proposition that such estoppel "bars a second interference as to 'claims to the same invention as the count of the interference.'"  That is the case here, because "the Broad's single-molecule RNA claims were designated as corresponding to the prior Count," a designation never challenged by CVC.

The brief then sets forth detailed arguments for each of its propositions regarding why CVC's Opposition fails to rebut its arguments in support of Substantive Motion No. 1.  To CVC's argument that Rule 127 estoppel does not apply to judgments of no interference-in-fact, the Broad argues that CVC's argument "conflicts with the language of the first sentence and does not give application to both sentences."  The first sentence of the Rule, the Broad argues, sets out estoppel without regard to "winners" and "losers," while the second sentence is directed at the "losing" party and setting forth an exception for "any contested subject matter for which that party was awarded a favorable judgment."  In the Broad's calculus, neither of these provisions provides CVC with the benefit of pursuing this interference after having failed to pursue subject matter relating to eukaryotic cell embodiments of CRISPR in the '048 Interference.  The Broad further cites the Notice of Proposed Rulemaking for Rule 127, 68 Fed. Reg. 66648, 66661 (Nov. 26, 2003), which they argue "flatly contradict[s]" CVC's interpretation of the Rule, and further notes that CVC's argument amounts to an admission that Rule 127 applies to situations where the Board finds there to be no interference-in-fact.  Finally on this point the Broad disputes CVC's characterization of the Board's finding of no interference-in-fact as being merely jurisdictional and amounting to dismissal; in their view the Board entered judgment and thus that decisions provokes the estoppel effects set forth in Rule 127.

The brief then sets out an exposition of the Broad's understanding and assertion of the development of the PTAB's estoppel rules, going into detail regarding the similarities and differences between Rule 1.658(c) and Rule 127.  In brief, the Broad argues that Rule 1.658(c) applied to "any type of judgment" and that revision of the Rule did not change (and was not intended to change) the scope of this estoppel.  And here the brief revisits a familiar refrain, asserting that under Rule 1.658(c) the estoppel would apply for a party that failed to file a motion to add a claim regardless of whether judgment was entered on priority or "ancillary grounds," meaning in this case a finding of no interference-in-fact.

The Broad also argues that these estoppel rules promulgated by the PTAB are not inconsistent with common law principles.  Citing Nevada v. United States, 463 U.S. 110, 129-30 (1983), they argue that "common law principles recognize that final judgment in an action results in estoppel with respect to undecided issues that could have been raised but were not" (and further assert that the case CVC cited in support of its position, Duvall v. Atty. Gen. of U.S., 436 F.3d 382, 388 (3d Cir. 2006), is in fact consistent with the Broad's own analysis of estoppel principles in the interference context.

Next, the Broad maintains that there is no statutory requirement that the PTAB always determine priority, based in the Board's discretion whether to declare an interference in the first place (although this argument does not reach the question of whether such a requirement arises once the PTO properly institutes an interference proceeding, although the brief does cite the Director's discretion (but surely not unfettered) to discontinue an interference).

The brief then turns to a disquisition on why CVC's arguments are merely "post-hoc" attempts to be absolved from its failure to move to add eukaryotic CRISPR claims in the '048 Interference.  (Indeed, the entirety of the Broad's argument boils down to this point.)  The Broad rebuts CVC's contention that its claims were not in condition for allowance as a rationale (amounting to essentially a ripeness argument), based on the absence of any such requirement in Standing Order ¶ 208.5.1 (albeit being an argument of inference rather than directly stated).  The Broad further characterizes CVC's arguments as improperly attempting to blame the PTAB for its failure to move, citing colloquy from the teleconference between the parties and the Board regarding authorization to file motions.  The Broad states frankly that CVC's argument that the Broad was required to add a claim directed to eukaryotic CRISPR to CVC's application in the '048 Interference was wrong, because Standing Order ¶ 208.5.1 would have required the Broad to "[c]ertify that the movant is not aware of any reason why the claim is not patentable," which they certainly were not willing to do.  The brief points out the inconsistency in CVC's arguments regarding prosecution strategy in view of CVC having previously presented eukaryotic CRISPR claims before (and then cancelling them) suggesting the '048 Interference.  Finally, the Broad (in a more semantical than legal argument) attempts to rebut CVC's argument that it had not provoked an interference in this case, because by copying the Broad's claims it did so (as opposed to suggesting an interference), which CVC certainly did not do.

The brief ends with two points.  First, that this interference is estopped in totality (in opposition to CVC's argument that the scope of any estoppel is limited to dual-molecule CRISPR embodiments), addressing both motion estoppel and judgment estoppel, and restating succinctly its argument in favor of estoppel:

The PTAB's rules afforded CVC every opportunity to present claims and arguments regarding the eukaryotic subject matter of the 048 Interference.  The PTAB's rules do not allow a second run at another party's claims to that same subject matter in a later interference.  Indeed, allowing otherwise would vitiate the goals of finality and efficiency served by the estoppel rules.

And of course the Broad does not miss its opportunity to state unequivocally that "CVC's claims should not issue" in the event that this interference should be dissolved based on the Broad's own arguments about estoppel:

CVC's argument ignores that Broad has already been awarded claims to the eukaryotic invention in issued patents.  CVC cannot obtain claims to the same subject matter absent an interference with Broad.  CVC could have had such an interference previously but strategically declined to give the PTAB the option of implementing such an interference at that time.  Accordingly, CVC is estopped from pursuing such an interference, and cannot obtain Broad's eukaryotic claims.

Berkeley Files Responsive Motion to Broad's Substantive Motion No. 2 in Interference

By Kevin E. Noonan --

As previously discussed, Senior Party The Broad Institute (joined by Harvard University and MIT) on October 14th filed Substantive Motion No 2 (to substitute the count) in the current interference over CRISPR technology (No. 106,115).

Count 1 of the interference as declared is:

An engineered, programmable, non-naturally occurring Type II CRISPR-Cas system comprising a Cas9 protein and at least one guide RNA that targets and hybridizes to a target sequence of a DNA molecule in a eukaryotic cell, wherein the DNA molecule encodes and the eukaryotic cell expresses at least one gene product and the Cas9 protein cleaves the DNA molecules, whereby expression of the at least one gene product is altered; and, wherein the Cas9 protein and the guide RNA do not naturally occur together, wherein the guide RNAs comprise a guide sequence fused to a tracr sequence.

or

A eukaryotic cell comprising a target DNA molecule and an engineered and/or non-naturally occurring Type II Clustered Regularly Interspaced Short Palindromic Repeats (CRISPR)-— CRISPR associated (Cas) (CRISPR-Cas) system comprising
    a) a Cas9 protein, or a nucleic acid comprising a nucleotide sequence encoding said Cas9 protein; and
    b) a single molecule DNA-targeting RNA, or a nucleic acid comprising a nucleotide sequence encoding said single molecule DNA-targeting RNA; wherein the single molecule DNA-targeting RNA comprises:
        i) a targeter-RNA that is capable of hybridizing with a target sequence in the target DNA molecule, and
        ii) an activator-RNA that is capable of hybridizing with the targeter-RNA to form a double-stranded RNA duplex of a protein- binding segment,
    wherein the activator-RNA and the targeter-RNA are covalently linked to one another with intervening nucleotides; and
    wherein the single molecule DNA-targeting RNA is capable of forming a complex with the Cas9 protein, thereby targeting the Cas9 protein to the target DNA molecule, whereby said system is capable of cleaving or editing the target DNA molecule or modulating transcription of at least one gene encoded by the target DNA molecule.

The Broad's proposed Count 2 is:

A method, in a eukaryotic cell, of cleaving or editing a target DNA molecule or modulating transcription of at least one gene encoded by the target DNA molecule, the method comprising:
    contacting, in a eukaryotic cell, a target DNA molecule having a target sequence with an engineered and/or non-naturally-occurring Type II Clustered Regularly lnterspaced Short Palindromic Repeats (CRISPR)-CRISPR associated Cas) (CRISPR-Cas) system comprising:
        a) a Cas9 protein, and
        b) RNA comprising
            i) a targeter-RNA that is capable of hybridizing with the target sequence of the DNA molecule or a first RNA comprising (A) a first sequence capable of hybridizing with the target sequence of the DNA molecule and (B) a second sequence; and
            ii) an activator-RNA that is capable of hybridizing to the targeter-RNA to form an RNA duplex in the eukaryotic cell or a second RNA comprising a tracr sequence that is capable of hybridizing to the second sequence to form an RNA duplex in the eukaryotic cell,
    wherein, in the eukaryotic cell, the targeter-RNA or the first sequence directs the Cas9 protein to the target sequence and the DNA molecule is cleaved or edited or at least one product of the DNA molecule is altered.

The distinction the Broad made in its Motion is between embodiments of CRISPR methods that are limited to "single-molecule guide RNA" (aka "fused" or "covalently linked" species), versus embodiments that encompass single-molecule and "dual molecule" species (wherein the in the latter versions the "targeter-RNA" and "activator-RNA" as recited in the proposed Count are not covalently linked).  The Broad argued that this Count should be adopted by the Board because it "properly describes the full scope of the interfering subject matter between the parties because both parties have involved claims that are generic, non-limited RNA claims."  The brief also argued that proposed Count 2 "sets the correct scope of admissible proofs [i.e., their own] for the breakthrough invention described by the generic claims at issue in these proceedings—the successful adaption of CRISPR-Cas9 systems for use in eukaryotic environments," which The Broad contended current Court 1 (in either alternative) does not.

Early last month (November 7th), Junior Party the University of California, Berkeley; the University of Vienna; and Emmanuelle Charpentier; collectively, "CVC") filed its Responsive Motion (Contingent) to the Broad's motion no. 2, to be awarded priority to its earlier applications for the subject matter of proposed new Count 2.  (Careful readers with appreciate that in many ways this brief is substantially identical to CVC's Substantive Motion No. 1 filed to be accorded benefit to the same priority applications for the current Count.)  As required by the rather formulaic procedural rules of interferences, the brief is structured to address (and rebut) Senior Party's argument; the argument (simply stated) is that CVC is entitled to priority to the following priority applications: USSN 61/652,086, filed May 25, 2012 (P1); USSN 61/716,256, filed October 19, 2012 (P2): USSN 61/757,640, filed January 28, 2013 (P3);    USSN 13/842,859, filed March 15, 2013; USSN 14/685,504, filed April 13, 2015; or USSN 15/138,604, filed April 26, 2016.

Mirroring the Broad's motion, CVC sets forth in detail the disclosure in its earlier priority applications for at least one embodiment falling within the scope of proposed Count 2.  And as the Broad did in its motion, the brief hagiograhically recites the "ground-breaking" nature of their work, stating that the earliest priority document (P1) disclosed "the minimal components required to generate a functional CRISPR-Cas9 DNA-cleavage complex—Cas9, crRNA, and tracrRNA."  In addition, and addressing the Broad's argument that CVC's disclosure (and this interference) were directed to single-molecule embodiments of CRISPR, CVC argues that on the contrary this priority document "disclosed, for the first time, that complexes of Cas9 and a double- or single-molecule DNA-targeting RNA . . . are useful for targeted DNA cleavage and described numerous applications of this gene-editing technology, including modifying target DNA in eukaryotic cells" and that "[t]he CVC inventors immediately understood that the CRISPR-Cas9 DNA-cleavage complex could be used in a variety of different cellular and noncellular settings."  The brief recites (prophetic) Example 1 in the P1 specification, asserting that the failure of the P1 specification to show actual reduction to practice is not required to satisfy the requirement for entitlement benefit.  CVC also cautions the Board against any attempt by the Broad to "erroneously to link the issues in this motion to the PTAB's termination of Interference No. 106,048 due to no interference-in-fact," stating that "the legal and factual issues raised here are fundamentally different from those decided in the prior '048 proceeding" based on the PTAB's own prior statements of the grounds for its no interference-in-fact determination. Rather, according to CVC:

[A person of ordinary skill in the art] reading P1 in light of the state of the art at the time of filing would have understood that the application describes and enables at least one embodiment within the scope of Proposed Count 2.  Moreover, post-filing-date publications report successfully practicing CVC's claimed invention in eukaryotes using the very methods and components that P1 describes.  The Board should therefore accord CVC the benefit of P1's May 25, 2012 filing date with respect to Proposed Count 2.

What follows is a succinct statement of the Precise Relief Requests (pursuant to PTAB rules) and support in the P1 specification for this relief, recited in the alternative with the other priority documents recited in CVC's request for relief.  The standard, undisputed by the parties, is that to be accorded benefit of priority a prior application must show constructive reduction to practice (CRTP) regarding at least one embodiment falling within the scope of the count, citing Falkner v. Inglis, 448 F.3d 1357, 1362 (Fed. Cir. 2006).  After setting out the legal grounds for CRTP, the brief then applies these rubrics to the disclosure in P1 for subject matter falling within the scope of Count 2 (which CVC argues satisfies these requirements).  Along the way, the brief also suggests that "Broad will doubtlessly rely on cherry-picked quotes about whether or not the inventors or experts knew CRISPR would work in eukaryotic cells before testing it," rejecting these anticipated arguments on the ground that CTRP is grounded on what is disclosed in the specification.  The relevant P1 disclosure for CVC is that CRISPR is functional "when removed from its natural prokaryotic cellular milieu, which is highly relevant here because it establishes CVC's possession of the necessary and sufficient components for a functional CRISPR-Cas9 DNA-cleavage complex regardless of its environment" (emphasis in brief).

The argument is illustrated by Figures from the P1 application:

And explicit disclosure compared with the elements of proposed Count 2.

The brief then sets forth specific disclosure related to the elements of Count 2 (also provided in Appendix 3 entitled "Exemplary Evidence of Constructive Reduction to Practice of Proposed Count 2 in the P1 '068 Application"), and CVC further asserts that "[t]he inventors fully grasped the broad utility of such a method as aptly illustrated by the many types of 'target cells of interest' suitable for the methods described in P1, including a variety of eukaryotic cells (elements [1]-[2]) such as a fish, human, and fruit fly cell," noting that "[t]hese features are not merely recited in P1, but diagrammed, discussed, and specifically exemplified showing the inventors' possession" based on express disclosure cited with particularity in the brief (including specifically the prophetic use of CRISPR in fish cells).  CVC presents explicit argument relating to what the skilled worker would understand CVC possessed and would be able to accomplish without undue experimentation with regard to the CRTP requirement for being accorded benefit.  Finally in this regard, the brief asserts that post-filing evidence (much of it by third parties) further supports a conclusion of constructive reduction to practice in the P1 disclosure:

Within a year of CVC publishing that Cas9 and a [single guide RNA] such as chimera A (or a double-molecule RNA) formed a functional DNA-cleavage complex (Ex. 3202), other researchers used materially the same components and methods disclosed in P1 to practice the fish cell embodiment—objectively confirming that P1 enables practicing the method of E4.  While the studies described below published after P1's May 25, 2012 filing

date, post-priority date evidence "may show, for example, that practicing the invention did not require undue experimentation," citing Amgen, Inc. v. Sanofi, 872 F.3d 1367, 1379 (Fed. Cir. 2017); see also, In re Wands, 858 F.2d 731, 739 (Fed. Cir. 1988); In re Hogan, 559 F.2d 595, 605 (Fed. Cir. 1977).

CVC supports its allegations of what the skilled person would understand from the disclosure in the P1 specification by declaration testimony an expert, Dr. Peterson (who eventually will be subject to cross-examination by the Broad in this interference).  Specifically, Dr. Peterson attests extensively to the applicability of CRISPR as set forth in P1 to use in human cells, which CVC asserts is also shown by third-party success in applying CRISPR to human cells, and fruit fly cells.  Thus, CVC asserts "[i]n sum, the great weight of evidence compels a finding that P1 describes and enables each of the fish (E4), human (E5), and fruit fly (E6) cell methods, any one of which, on its own provides a CRTP of Proposed Count 2."

The brief then turns on the distinction between what was required for the Broad to prevail (as it did) in the earlier interference and in this one:

Broad's previously asserted arguments wrongly impose a reasonable expectation of success standard (obviousness) on §112, first paragraph, which contains no such standard.  Obviousness "turns on . . . whether the claimed invention would have been obvious in view of the prior art."  Allergan, Inc. v. Sandoz, Inc., 796 F.3d 1293, 1310 (Fed. Cir. 2015) (emphasis in original).  "In contrast, the enablement inquiry turns on whether the skilled artisan, after reading the specification, would be able to make and use the claimed invention without undue experimentation."  Id. (emphasis in original).  Similarly, "[t]he standard for satisfying the written description requirement is whether the disclosure 'allow(s) one skilled in the art to visualize or recognize the identity of the subject matter purportedly described.'"  Alcon, 745 F.3d at 1190 (emphasis added; citation omitted); see also, Ariad, 598 F.3d at 1351.  Any argument to the contrary erroneously conflates obviousness with written description and enablement.

Finally, the brief argues in the alternative that the other applications CVC asserts for priority contain the P1 disclosure relied upon for priority in this brief, and thus for the same reasons (set forth in brief for each reference) CVC is entitled to priority to these applications, based on the "continuous chain" of priority in these CVC applications.

Berkeley Files Substantive Motion No. 2 to be Accorded Benefit to Earlier Priority Application in Interference

By Kevin E. Noonan --

On October 14th, Junior Party the University of California, Berkeley; the University of Vienna; and Emmanuelle Charpentier; collectively, "CVC") filed its Substantive Motion No. 1 to be awarded priority benefit to their earlier priority applications: USSN 61/652,086, filed May 25, 2012 (P1); USSN 61/716,256, filed October 19, 2012 (P2); USSN 61/757,640, filed January 28, 2013 (P3); USSN 13/842,859, filed March 15, 2013; USSN 14/685,504, filed April 13, 2015; or USSN 15/138,604, filed April 26, 2016, in Interference No. 106,115 against Senior Party the Broad Institute, Harvard University, and the Massachusetts Institute of Technology.

CVC sets forth in detail the disclosure in its earlier priority applications for at least one embodiment falling within the scope of Count 1 of this interference.  The brief recites the "ground-breaking" nature of their work, stating that the earliest priority document (P1) disclosed "the minimal components required to generate a functional CRISPR-Cas9 DNA-cleavage complex—Cas9, crRNA, and tracrRNA."  In addition, CVC argues that this priority document "disclosed, for the first time, that complexes of Cas9 and a double- or single-molecule DNA-targeting RNA . . . are useful for targeted DNA cleavage and described numerous applications of this gene-editing technology, including modifying target DNA in eukaryotic cells," noting the many accolades bestowed upon CVC's inventors by the scientific community.  CVC further argues that "[t]he CVC inventors immediately understood that the CRISPR-Cas9 DNA-cleavage complex could be used in a variety of different cellular and noncellular settings."  The brief recites (prophetic) Example 1 in the P1 specification, and the (albeit prophetic) application of CRISPR technology to fish, human, and fruit fly cells.

The brief is careful to note that any failure of the P1 specification to show actual reduction to practice is not required to satisfy the requirement for entitlement benefit.  CVC also cautions the Board against any attempt by the Broad to "erroneously to link the issues in this motion to the PTAB's termination of Interference No. 106,048 due to no interference-in-fact," stating that "the legal and factual issues raised here are fundamentally different from those decided in the prior '048 proceeding" based on the PTAB's own prior statements of the grounds for its no interference-in-fact determination.  Rather, according to CVC:

[A person of ordinary skill in the art] reading P1 in light of the state of the art at the time of filing would have understood that the application describes and enables at least one embodiment within the scope of the count.  Moreover, post-filing-date publications report successfully practicing CVC's claimed invention in eukaryotes using the very methods and components that P1 describes.  The Board should therefore accord CVC the benefit of its first provisional application.

What follows is a succinct statement of the Precise Relief Requests (pursuant to PTAB rules) and support in the P1 specification for this relief, recited in the alternative with the other priority documents recited in CVC's request for relief.  The standard, undisputed by the parties, is that to be accorded benefit of priority a prior application must show constructive reduction to practice (CRTP) regarding at least one embodiment falling within the scope of the count, citing Falkner v. Inglis, 448 F.3d 1357, 1362 (Fed. Cir. 2006).  After setting out the legal grounds for CRTP, the brief then applies these rubrics to the disclosure in P1 for subject matter falling within the scope of the interference Count (which CVC argues satisfies these requirements).  Along the way the brief also suggests that "Broad will doubtlessly rely on cherry-picked quotes about whether or not the inventors or experts knew CRISPR would work in eukaryotic cells before testing it," rejecting these anticipated arguments on the ground that CTRP is grounded on what is disclosed in the specification citing Ariad Pharms., Inc. v. Eli Lilly and Co., 598 F.3d 1336, 1351 (Fed. Cir. 2010) (en banc); Frazer v. Schlegel, F.3d 1283, 1288 (Fed. Cir. 2007); and Centrak, Inc. v. Sonitor Tech., Inc., 915 F.3d 1360, 1369 (Fed. Cir. 2019).  The relevant P1 disclosure for CVC is that CRISPR is functional "when removed from its natural prokaryotic cellular milieu, which is highly relevant here because it establishes CVC's possession of the necessary and sufficient components for a functional CRISPR-Cas9 DNA-cleavage complex regardless of its environment" (emphasis in brief).

The argument is illustrated by Figures from the P1 application:

And explicit disclosure compared with the elements of the interference Count:

The brief then sets forth specific disclosure related to the elements of the Count (also provided in Appendix 3 entitled "Exemplary Evidence of Constructive Reduction to Practice of Count 1 in the P1 '068 Application"), and CVC further asserts that "[t]he inventors fully grasped the broad utility of such a method as aptly illustrated by the many types of 'target cells of interest' suitable for the methods described in P1, including a variety of eukaryotic cells (elements [1]-[2]) such as a fish, human, and fruit fly cell," noting that "[t]hese features are not merely recited in P1, but diagrammed, discussed, and specifically exemplified showing the inventors' possession" based on express disclosure cited with particularity in the brief (including specifically the prophetic use of CRISPR in fish cells).  CVC presents explicit argument relating to what the skilled worker would understand CVC possessed and would be able to accomplish without undue experimentation with regard to the CRTP requirement for being accorded benefit.  Finally, in this regard, the brief asserts that post-filing evidence (much of it by third parties) further supports a conclusion of constructive reduction to practice in the P1 disclosure:

Within a year of CVC publishing that Cas9 and a [single guide RNA] such as chimera A (or a double-molecule RNA) formed a functional DNA-cleavage complex (Ex. 3202), other researchers used materially the same components and methods disclosed in P1 to practice the fish cell embodiment—objectively confirming that P1 enables making and using the fish cell of E1.  While the studies described below published after P1's May 25, 2012 filing date, post-priority date evidence "may show, for example, that practicing the invention did not require undue experimentation," citing Amgen, Inc. v. Sanofi, 872 F.3d 1367, 1379 (Fed. Cir. 2017); In re Wands, 858 F.2d 731, 739 (Fed. Cir. 1988); In re Hogan, 559 F.2d 595, 605 (Fed. Cir. 1977).

CVC supports its allegations of what the skilled person would understand from the disclosure in the P1 specification by declaration testimony an expert, Dr. Peterson (who eventually will be subject to cross-examination by the Broad in this interference).  Specifically, Dr. Peterson attests extensively to the applicability of CRISPR as set forth in P1 to use in human cells, which CVC asserts is also shown by third-party success in applying CRISPR to human cells, and fruit fly cells.  Thus, CVC asserts "[i]n sum, the great weight of evidence compels a finding that P1 describes and enables each of the fish (E1), human (E2), and fruit fly (E3) cell methods, any one of which, on its own provides a CRTP of Count 1."

The brief then turns on the distinction between what was required for the Broad to prevail (as it did) in the earlier interference and in this one:

Broad's previously asserted arguments wrongly impose a reasonable expectation of success standard (obviousness) on §112, first paragraph, which contains no such standard.  Obviousness "turns on . . . whether the claimed invention would have been obvious in view of the prior art."  Allergan, Inc. v. Sandoz, Inc., 796 F.3d 1293, 1310 (Fed. Cir. 2015) (emphasis in original).  "In contrast, the enablement inquiry turns on whether the skilled artisan, after reading the specification, would be able to make and use the claimed invention without undue experimentation."  Id. (emphasis in original).  Similarly, "[t]he standard for satisfying the written description requirement is whether the disclosure 'allow(s) one skilled in the art to visualize or recognize the identity of the subject matter purportedly described.'"  Alcon, 745 F.3d at 1190 (emphasis added; citation omitted); see also, Ariad, 598 F.3d at 1351.  Any argument to the contrary erroneously conflates obviousness with written description and enablement.

Finally, the brief argues in the alternative that the other applications CVC asserts for priority contain the P1 disclosure relied upon for priority in this brief, and thus for the same reasons (set forth in brief for each reference) CVC is entitled to priority to these applications, based on the "continuous chain" of priority in these CVC applications.

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The authors and contributors of Patent Docs wish their readers and families a Happy Thanksgiving.  Publication of Patent Docs will resume on November 30th.

The authors and contributors of Patent Docs wish their readers and families a Happy Thanksgiving.  Publication of Patent Docs will resume on November 30th.